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FO R ECASTI N§|i|igp N D I Tl O N S 




Class _y! 

Book 1 

Copyright ]>1". 



-be. 



COPYRIGHT DEPOSIT. 



Business Barometers 

used in the 

Accumulation of Money 

A Text Book on Fundamental Statistics 
for Investors and Merchants 



By 

Roger Ward Babson 



Published by 
The Office of Roger W. Babson, Inc. 

Wellesley Hills, Mass., U. S. A. 



I: 



\0 



This Edition Copyrighted 1909 

by 

Roger W. Babson 



LIBRARY of CONGRESS 

Two CoDtes Foceived | 

JUN 25 ^W'JS I 

Cc-pyniTH' entry 5 

Uu,' S5 CU AAV. NC. > 

COPY a: i 



K^ 



DeO(cateJ) 
to 

PROFESSOR G. F. S. 



"People will endeavor to forecast the future and make agree- 
ments according to their prophecy. Speculation of this kind by 
competent men is the self-adjustment of society to the probability." 

— Judge Holmes in a United States Supreme Court decision. 



*' / hold that a man who is long-headed, who 
foresees and judges accurately, has a?i advantage 
over his neighbo?, and it is not accounted inrmoral 
for him to use that advantage, because he is i?idivid- 
ually better fitted for the business; and it inhej'es in 
him by a law of nature, that he has a right to the 
whole of himself legitimately applied. If one man, 
or twenty men, looking at the state of the nation 
here, at the crops, at the possible contingencies and 
risks of climate, at the cofiditions of Europe ; in 
other words, taking all the elements that belong to the 
world, into consideration, are sagacious enough to 
prophecy the best of action, I doti't see why it is not 
legitimate.''^ 

Henry Ward Beecher. 



PREFACE 

This little book is prepared for two purposes, 
viz: 

1. To show the possibilities and the limita- 
tions of Financial Statistics. 

2. To give simple and practical examples of 
the use of such Statistics. 

There are several books which enter into the 
theory and technique of railroad reports and 
other statistical data, but we know of no book 
which especially appeals to the banker, the in- 
vestor, and the merchant. To practical interests 
of this class of readers, this short work is dedi- 
cated. 

If, at first reading, the book should seem eith- 
er too complicated, or extremely simple, we sin- 
cerely recommend a second reading, as it is not 
complicated, neither is it elementary. It should, 
moreover, be the means of aiding every reader 
in creating and retaining wealth. 

The writer of this book wishes to acknowl- 
edge the aid which he has received from Miss 
Mary B. Smith and Mr. Robert G. Bolles, both 
of whom have greatly aided in the compilation; 
also to Miss Sawyer, of Wellesley, who aided in 
reading copy. 



He also wishes again to thank friends in the 
various Stock Exchange Firms, Bond Houses, 
and Banks who have been patient with him dur- 
ing the experimental and formulative stages of 
the work. These friends have not only recog- 
nized the difficulties under which the work has 
been performed, but have always greatly aided 
by criticisms and suggestions. 

R. W. B. 
Wellesley Hills, Mass., March i, 1909. 



TABLE OF CONTENTS 



CHAPTER I 
The Theory of Statistics 
CHAPTER II 
Range of Stock Market since ] 860 showing the possi- 
bilities of Profit to an Investor 
CHAPTER III 
Range of Commodity Market since 1 860, showing the 
possibilities of Profit to a Merchant 
CHAPTER IV 
Fundamental Statistics as used in determining When to 
Buy and Sell 
CHAPTER V 
Conditions and Events since 1 860 
CHAPTER VI 
The Twenty-five Subjects studied under Fundamental 
Statistics 
CHAPTER VII 
A Talk on Coppers 
CHARTS 

1 A Chart showing the range of the Stock Market Since 

1860 

2 A Chart showing the range of the Commodity Mar- 

ket since 1 860 



FOREWORD 

"A study of past disturbances leads to the 
conviction that no severe depression has occurred 
which was not preceded by loud warnings. These 
warnings ought not to pass unheeded and in 
order to recognize them promptly, it is necessary 
that accurate statistics be furnished. Much im- 
provement has been accomplished in the last few 
years, though it is to be regretted that so much 
of our statistical information is fragmentary or 
inaccurate. Official and private publications fur- 
nish much valuable information. They include 
voluminous figures of deposits and loans of 
banks, movement of specie, exports and imports, 
railway earnings, wholesale prices, and the con- 
dition and probable yield of crops. A vital de- 
fect in many of them is the omission to give, for 
purposes of comparison, similar figures for pre- 
vious months and years. Another defect is the 
absence of uniformity in the methods and classi- 
fication employed. These comparative statistics 
would afford a means of determining the trend 
of events, and give warning when prices are un- 
naturally high or any branch of business is 
overdone. It is also note-worthy that we do not 
sufficiently consider statistics relating to the 



course of affairs in foreign countries, the influ- 
ence of which upon our own condition is of the 
utmost importance, by reason of the enlarge- 
ment of our trade and the closer international 
relations of modern commerce. Other statistics, 
which are inadequate or lacking and which 
would be of great value, are those pertaining to 
the employment of labor, capital invested in new 
enterprises, amounts expended in new con- 
struction, volume of production in the various 
kinds of manufactures, and statistics of state 
banks and savings institutions similar to those 
pertaining to national banks. After making due 
allowance for the insufficiency of statistics, it 
must be said that the failure to pay sufficient at- 
tention to those already available is equally to 
be regretted." 

The above was written in 1902 by Hon. The- 
odore E. Burton, U. S. Senator from Ohio, and 
is very interesting as a matter of prophecy. The 
"vital defects" moreover have now been over- 
come and we are able to obtain and furnish reg- 
ularly the identical comparative figures which 
he then so much desired. 




CHAPTER I. 

THE THEORY OF STATISTICS AFFECTING INVEST- 
MENT STOCKS. 

S it possible, actually and surely, to 
make money by the use of statis- 
tics? 

Do statistics prove of absolute 
value to an investor, merchant or 
banker, or are they a luxury? When one hears 
that a bond house, v^hich is supposed to have an 
elaborate statistical department, has become 
"loaded" with unmarketable securities, one v^on- 
ders whether such statistical departments are of 
any practical value or whether they are main- 
tained merely as an advertisement, or for other 
and sentimental reasons. The same doubt arises 
when one hears that all of the customers of 
some mercantile house, which has been issuing 
elaborate booklets and charts, are on the wrong 
side of the market. If of actual value in mak- 
ing money or in giving helpful advice to cus- 
tomers, the average business man is willing to 
pay for any service supplying the statistics 
necessary; but if he cannot make money more 
readily by their use, he does not wish the statis- 
tics, either at his home desk, or at the office. In 
other words, the business man is anxious to 



12 BUSINESS BAROMETERS 

have any data directly increasing profits, but 
unless he is convinced that the investment will 
be worth while, he has no reason for adding the 
cost of a statistical service to his other expenses. 
As this position is assumed by the brightest 
brokers, bond dealers and investors, we here- 
with submit a short brief on the use of statistics 
in business. 

The Two Glasses of Statistics 

Statistics are divided into two classes viz.: 
Comparative Statistics and Fundamental Statis- 
tics ; and we herewith give a very short descrip- 
tion of these two classes : 

I. Comparative Statistics 

From the investor's point of view, this class 
includes all particulars concerning the bonded 
debt, the earnings and the general physical and 
financial conditions of properties. Such statis- 
tics are very necessary for comparing securities 
of different companies and the different securi- 
ties of the same company. So far as the mer- 
chant is concerned, Comparative Statistics re- 
late to the weight, quality, age, and method of 
manufacture of the merchandise in which he 
deals, together with such ''trade figures" as are 
published in the trade journals. If such data is 



THEORY 13 

always up-to-date, these Comparative Statistics 
are very valuable for enabling one to select se- 
curities, either for the purpose of buying or sell- 
ing. As the largest and most successful stock 
exchange brokers, bond houses and mercantile 
firms, are already well supplied with Compara- 
tive Statistics and, so far as they are useful, 
are obtaining excellent results, we shall not here 
discuss details concerning this class. We wish 
it clearly understood, however, that such statis- 
tics are worthless for determining the course of 
the entire or general market. Comparative Sta- 
tistics determine only actual values, enabling one 
to select safe securities or good merchandise, or 
to select the better of two or more securities or 
grades of merchandise. With the general mar- 
ket conditions remaining fixed, Comparative 
Statistics might be used for forecasting a rise 
or a decline ; but the general market is so seldom 
stable, that Comparative Statistics cannot be de- 
pended upon to serve this purpose. It is this 
fact, that they are inadequate for analyzing gen- 
eral conditions, that has brought Comparative 
Statistics into ill-repute. 

The market value of securities or merchandise 
may continually decline, and the actual value of 
the same increase, or vice versa. 



14 BUSIXESS BAKOMETERS 

Whoever bases either purchases or sales, 
upon earnings, physical conditions or other 
Comparative Statistics WITH THE IDEA OF 
SELLING AT A PROFIT, will surely lose 
money. Note the phrase "with the idea of sell- 
ing at a profit." Such statistics may be used for 
selecting a safe investm.ent or good merchandise, 
such as one may desire to hold permanently or 
possibly for a "long pull" ; but they are absolute- 
ly useless for "short terms." It is because this 
fact is not being recognized by many firms, con- 
tent with accumulating only Comparative Sta- 
tistics, that even with their elaborate statistical 
departments, they are often on the losing side. 

11. Fundamental Statistics 

These relate to underlying conditions of the 
country and make it possible to forecast demand, 
supply, money conditions, etc. Fundamental 
Statistics, although now used by only the most 
careful investors and merchants, are by far the 
most necessary and profitable. All financial his- 
tory has consisted of distinct cycles, and although 
of different durations, each cycle has consisted 
of four distinct periods; namely: 

I. A Period of Prosperity. 



THEORY 15 

2. A Period of Decline. 

3. A Period of Depression. 

4. A Period of Improvement. 

Moreover the laws of nature, commerce and 
industry- determine that these cycles will always 
consist of four distinct periods. The idea that 
prosperity can ever become permanent and will 
not be followed always by a business depression, 
or the idea that there might be an unlimited de- 
pression without succeeding general activity and 
high market prices, shows both ignorance of 
econom.ics and utter inexperience in the business 
world. 

A list of twenty-five subjects about which 
statisticians and investors systematically collect, 
analyze and index statistics is given in Chapter 
IV. These are the subjects studied by the oldest, 
richest and most conservative financial and mer- 
cantile houses of the world for determining 
which of the above mentioned periods the coun- 
try is experiencing or is about to enter at any 
given time. The use of these Fundamental Sta- 
tistics eliminates all guessing and uncertainty, 
concerning market miovements. 

The only requirement is to collect, tabulate, 
and study, the weekly and monthly figures as 
they are received. These plainly show whether 



16 BUSINESS BAROMETERS 

the general tendency of the market is upward or 
downward and whether it is time to buy or to 
sell, or to do neither. As above stated, these 
Fundamental Statistics are even more important 
than Comparative Statistics. Xot only are the 
latter of little value, unless supplemented by 
these Fundamental Statistics, but experience has 
shown that such investors as have confined their 
operations to standard securities, and such mer- 
chants as have bought only staple goods, have 
m.ade fortunes for themselves and their custom- 
ers by a study of these Fundamental Statistics 
exclusively. 

Conclusion 

The amount of m.oney which can be made by 
the study of such statistics is limited only by the 
original capital and the number of years the 
study is continued. Comparative Statistics are 
used for selecting securities and comimodities 
which are absolutely safe and which have the 
greatest prospect of increase in market value 
under fixed market conditions. Fundamental 
Statistics are employed for determining these 
general market conditions and whether or not it 
is wise to purchase or to sell, or to do neither. 
Investors use this data in order to purchase se- 






^ 



THEORY 17 




curities only when they are low, holding them 

for from three to six years until they are high, 

and then selling and depositing in a bank the 

proceeds received therefrom. After said sale, 

they leave the money on deposit for from three 

to six years, until the same securities again sell 

low, when they again purchase them or other se- i 

curities of the highest grade. ^ iW*^ 

Alany such investors triple their money about ^ «^- v 
every five years, with very little risk, and with 
little trouble. By a study of Fundamental Sta- 
tistics, some individuals, with equally little risk 
and Vv^ithout any margin-purchases, but by pur- 
chasing outright, high grade dividend paying , A 
securities, have turned an investment of $5,000 C^^rtv^^' d^'^-^ " 
into $250,000 in about twenty years. When Xo ^ttu.^ / 
one realizes the meaning of this, — that an invest- - *^^J\._ 
ment of $20,000 grows to $1,000,000 within ^^^'^^^'^ i 
twenty years, — the value of Fundamental Statis- <y'*^''*^'^^ ^^ 
tics is apparent. If one is not strictly an mY&s-^- ^^]}j^^jj^ 
tor, but is willing under a broker's guidance, to 
take advantage also of intermediate movements, 
which come possibly once or twice a year, much 
greater results are sometimes obtained. 

Again, many brokers urge customers to take 
advantage of declines ; they recommend ''short- 
sellmg'' in periods of great activity and pros- 



18 BUSINESS BAROMETERS 

perity and also the purchase of securities on 
margin during periods of depression. Such ad- 
vice is to be expected from a broker, but with 
any short-selling or margin-purchases, there is 
connected a certain element of risk, and the in- 
vestor then becomes a speculator. If margin 
purchases are undertaken, the margin kept 
should be large, — of from thirty to forty percent. 
Moreover, instead of selling short, the investors 
should buy "puts" for six months, or, if possi- 
ble, for longer time, in the London market. 
These "puts" allow the holder to make almost as 
much profit as if he had sold the stock short. 
Any loss he may sustain is limited to the price 
paid for the "put," or about $125 for one hun- 
dred shares of stock. 

There is no logical objection to buying on 
large margins ; but the point which the book em- 
phasizes is namely: An investment of a few 
thousand dollars can be multiplied to an invest- 
ment of several hundred thousand dollars in 
about tzventy years with but very little risk and 
without selling "short," or purchasing on mar- 
gin. The only requisite is a constant study of 
Comparative and Fundamental Statistics, and 
sufficient self control to act only in accordance 
with what these statistics clearly indicate, refus- 



THEORY 19 

ing to listen to the optimism or pessimism sup- 
plied by the daily papers and by the many indi- 
viduals who are always giving free advice. 

The above principles apply to bonds as truly 
as to stocks, and should be studied by the inves- 
tors who purchase only bonds as well as those 
who purchase stocks. Although bonds do not 
fluctuate as widely as stocks, and for this reason 
do not present, apparently, as great an oppor- 
tunity for profit, yet their minimum interest 
yield is absolutely fixed, which is not true even 
with the most conservative stocks. Bonds are 
especially recommended to persons dependent 
upon the income received from their investments ; 
and the writer is inclined to advise that all per- 
sons should have a portion of their principal 
either on deposit in a bank, or else in high grade 
bonds, or short time notes. 

Among other reasons, this advice is based on 
the fact that, if it becomes necessary to sell se- 
curities in order to obtain cash during a period 
of depression, a person may sell short term 
bonds or notes, with much less loss than long 
term bonds or stocks. However, persons who 
follow the theory emphasized in this book should 
have their principal at such times wholly, in 
cash or short time notes, instead of in either 



20 BUSINESS BAROMETERS 

stocks or long term bonds ; a practice which 
should eliminate the objection. 

Merchants who never buy or sell securities, 
use this data with equal profit. Fundamental 
Statistics clearly show the merchant when to 
buy and increase his stock of goods, and when to 
cut prices and reduce his stock. They also enable 
the merchant to forecast money conditions in or- 
der that he may intelligently decide whether to 
borrow the money necessary to allow customers 
further credit, or to reduce his loans and the 
indebtedness of his customers. Moreover, at all 
times, these figures show the merchant the con- 
dition of business throughout the country, so 
that he always knows whether the growth or 
contraction of his business is proportional to 
that of his competitors. 

Upon careful thought it must be admitted that 
the fortunes of America's merchant princes must 
have been created by a knowledge of these facts, 
rather than by simple selling to the trade at a 
normal profit. Therefore, not only does the 
proper use of Fundamental Statistics insure a 
merchant against losses, but their use should be 
almost as profitable to him as to the investor, 
enabling him to double and triple his capital 
every few years. 



THEOKY 21 



Such ideas of the value of statistics should 
therefore be especially interesting to the small 
merchant with capital of, for instance, only 
$10,000. For there is no reason why — with 
Fundamental Statistics as aid to the elimination 
of bad accounts and unsold goods — he should 
not have a capital of $250,000 within about 
twenty years. 



CHAPTER II 

RANGE OF THE LEADING INVESTMENT STOCKS SINCE 
i860, SHOWING HOW $2,500 INVESTED IN 1860 
WOULD AMOUNT TO OVER 5^I,8oO,000 IN I9O9. 

The accompanying chart is designed to show 
the fluctuations in the leading investment stocks 
from i860 to date as accurately as may be. 
Only the best stocks of the period are consid- 
ered, so the stocks described are as representa- 
tive as possible of the different classes of traffic 
and of the different sections of the country, 

"Central of New Jersey" is a minority stock, 
"St. Paul" is a speculative stock, and ''Dela- 
ware & Hudson" is a coal stock. The West is 
represented by "Great Northern," the Missis- 
sippi Valley by "Illinois Central," the South by 
"Louisville & Nashville" ; the central and mid- 
dle States by "New York Central" and "Penn- 
sylvania." The New England States are repre- 
sented by "New York, New Haven & Hartford," 
and "Pullman" is chosen for the most conserva- 
tive industrial. 

Of these ten, only three were in existence and 
prominent in i860. New York Central, Illinois 
Central and Delaware, Lackawanna & Western 



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N r STOCKS COViCRlNG A PliRIOD OF FROM FORTY TO FIFTY 

V prices together with date of each year. A much fr^^/^; "",^*"'!ier" 
Union Pacific, Reading, etc., were used. ^*"^ ^''^^V ih^Ztli 
which they have for making money by the purchase oi mu ■>■"• 

nt where the average stands AT ANY TIME i'^ J^'^^t^ Nnnhemthe 
n page 24 remembering to add to the price of Great Northern tne 





RANGE OF STOCK MARKET 23 

were active then and leaders still. 

In 1866 "Delaware & Hudson" and 
in 1872 ''Louisville & Nashville" became 
active, and in 1874 "Central of New Jersey." 
In 1876 "Pullman" became active and in 1889 
"Pennsylvania." These are the ten stocks used 
exclusively until 1900 when "Delaware, Lacka- 
wanna & Western" was, for various reasons, 
omitted. As "Great Northern" sold for the 
same price, namely 91, at about that time, 
this is substituted in its stead. 

In other words, only good stocks have been 
included in the list, stocks truly represen- 
tative during the period considered. Stocks 
which have shown any abnormal rise or decline 
have purposely been avoided. For this reason, 
stocks such as "Union Pacific," "Atchison" and 
"Reading" have been omitted. More industrials 
would have been included, if they had been in 
existence a longer period; but, as most of the 
companies have been organized only ten or fif- 
teen years, this was not possible. Therefore, 
the diagram may be depended upon, absolutely, 
as show^ing the fluctuations which a conserva- 
tive investor may expect. 

It has also been very interesting to figure the 
income received upon the investment, which va- 
ried from 5% to 10%. If all "rights" were 



24 BUSINESS BAKOMETERS 

considered, the profit would often be more than 
10% but in this also any possible exaggeration 
has been avoided. For greater exactness since 
"Great Northern" gave its ore certificates, the 
price of these certificates has been included with 
the price of the stock. The complete list, as it 
stood at the low point in 1907 and on January 
1st 1909, is as follows: 





Div. 


Low 1907 


Div. 


Jan. 1909 


Central New Jersey 


$8 


144 


$8 


228 


Chicago, Mil. & St. Paul 


7 


93 


7 


151 


Delaware & Hudson 


9 


124 


9 


181 


Gt. Northern plus 1 Ore. 










Cert. 


7 


144 


7 


221 


Illinois Central 


7 


116 


7 


149 


Louisville & Nashville 


6 


85 


5 


126 


New York Central 


6 


89 


5 


126 


N. Y.,N. H. & Hartford 





127 


8 


161 


Pennsylvania 


7 


103 


6 


132 


Pullman 


8 


135 


8 


171 



The list includes "Central of New Jersey," 
and "Chicago, Milwaukee & St. Paul," in order 
to tabulate a minority stock and a speculative 
stock. As an investment, however, others 
may be preferable. When substituting them, 
some brokers recommend that one select stocks 
selling for about the same prices as those omit- 
ted. It should always be remembered that an in- 
vestor, when buying or selling, should not study 
the present prices of the stocks which he intends 
to purchase, but rather the prices of the ten 



RAXGE OF STOCK MARKET 25 

representative stocks in the list given above. 
This is because he should buy or sell in accord- 
ance with general conditions, and not be gov- 
erned by the price of any stocks which he 
happens to hold. A diagram of any other ten 
stocks may be misleading and cause trouble. 

The low and high prices of the above ten 
stocks from i860 to date are given in the ac- 
companying tables : 

i860 AVERAGE 59-93 

Lackawanna ranged from 54 (Jan.) to 99 
(June); 111. Cent. 55 (Jan.) to 89 (Aug.); 
N. Y. Cent. 92 (Sept.) to 69 (Dec). 

1861 AVERAGE 62-84 
Lackawanna ranged from 84 (Mch.) to 65 

(Dec); 111. Cent. 88 (Jan.) to 55 (Aprii)^; 
N. Y. Cent. 82 (Jan.) to 68 (April). 

1862 AVERAGE 71-107 
Lackawanna ranged from 80 (April) to 130 

(Dec. ) ; 111 Cent. 55 (July) to 84 (Oct.) ; N. Y. 
Cent. 79 (Jan.) to 107 (Oct.) 

1863 AVERAGE 106-153 
Lackawanna ranged from 130 (Jan.) to 198 

(Dec) ; 111. Cent. 83 (Jan.) to 126 (Aug.) ; 
N. Y. Cent. 107 (Mch.) to 140 (Sept.). 

1864 AVERAGE 138-148 
Lackawanna ranged from 195 (Jan.) to 265 

(Sept.); 111. Cent, no (Mch.) to 135 (Oct.); 



26 BUSINESS BAROMETERS 

N. Y. Cent. 145 (Mch.) to 109 (Oct.). 

1865 AVERAGE 125-158 
Lackawanna ranged from 225 (Jan.) to 199 
(Mch.); 111. Cent. 92 (Mch.) to 130 (July); 
N. Y. Cent. 119 (Jan.) to 85 (April). 

1866 AVERAGE 99-128 

St. Paul ranged from 41 (]\Ich.) to 64 
(Nov.); Del. & Hud. 132 (Mch.) to 160 
(Nov.) : Lackawanna 162 (Jan.) to 127 (Feb.) ; 
111. Cent. 131 (Jan.) to 112 (Feb.); N. Y. 
Cent. 86 (Feb.) to 123 (Nov.). 

1867 AVERAGE 98-122 

Cent, of N. J. ranged from 125 (Jan.) to 
113 (Dec); St. Paul 25 (April) to 54 (July); 
Del. & Hud. 139 (Jan.) to 156 (Jan.) ; Lack- 
awanna 130 (July) to 109 (Oct) ; 111. Cent. 11 1 
(Jan.) to 135 (Dec.) ; N. Y. Cent. 94 (Feb.) 
to 118 (Dec); New Haven 114 (Jan.) to 140 
(Dec). 

1868 AVERAGE 108-147 

Cent, of N. J. ranged from 126 (June) to 
no (Dec); St. Paul 46 (Feb.) to in (Oct.); 
Del. & Hud. 165 (May) to 119 (Aug.) ; Lack- 
awanna no (Jan.) to 132 (Oct.); 111. Cent. 
130 (Jan.) to 159 (July) ; N. Y. Cent, no 
(April) to 159 (Dec) ; New Haven 133 (Jan.) 
to 159 (May). 



RANGE OF STOCK MARKET 27 

1869 AVERAGE 1 14-160 

St. Paul ranged from 84 (Aug.) to 61 
(Sept.) ; Del. & Hud. 134 (June) to 120 (Dec.) ; 
Lackawanna 120 (Jan.) to T04 (Nov.) ; 111. 
Cent. 148 (May) to 130 (Dec.) ; N. Y. Cent. 
217 (July) to 153 (Sept.) ; New Haven 160 
(Jan.) to 120 (April). 

1870 AVERAGE 102-120 

St Paul ranged from 75 (Jan.) to 52 (Dec.) ; 
Dei. & Hud. 115 (Mar.) to 127 (July); Lack- 
awanna 112 (May) to 100 (Sept.) ; 111. Cent. 
145 (Feb.) to 129 (July); N'. Y. Cent. 86 
(Jan.) to 102 (June) ; New Haven 134 (Jan.) 
to 159 (June). 

1871 AVERAGE 103-117 

St. Paul ranged from 48 (Jan.) to 64 (Sept.) ; 
Del. & Hud. 115 (Feb.) to 125 (Dec); Lack- 
awanna 102 (Feb.) to III (Sept.) ; 111. Cent. 
139 (Jan.) to 132 (Oct.) ; N. Y. Cent. 103 
(April) to 84 (Oct.) ; New Haven 140 (April) 
to 160 (June). 

1872 AVERAGE 97-110 

St. Paul ranged from 64 (April) to 51 
(Nov.) ; Del. & Hud. 124 (Jan.) to 115 (Oct.) ; 
Lackawanna 112 (Mar.) to 91 (Dec); 111. 
Cent. 140 (June) to 119 (Nov.); Louis. & 
Nash. 81 (Ott.) to 79 (Dec) ; N. Y. Cent. loi 



28 BUSINESS BAROMETERS 

(April) to 89 (Nov.) ; New Haven 148 (June) 
to 138 (Dec). 

1873 AVERAGE 75-106 

St. Paul ranged from 62 (x\pril) to 21 
(Nov.) ; Del. & Hud. 124 (Feb.) to 99 (Nov.) : 
Lackawanna 106 (June) to 79 (Nov.) ; 111. 
Cent. 126 (Jan.) to 90 (Nov.) ; Louis. & Nash. 
79 (Mch.) to 50 (Dec.) ; N. Y. Cent. 106 
(Feb.) to jy (Nov.) ; New Haven 142 (Feb.) 
to 112 (Nov.). 

1874 AVERAGE 87-99 

Cent, of N. J. ranged from 98 (Jan.) to 109 
(Feb.) ; St. Paul 41 (Jan.) to 31 (May) ; Del. 
& Hud. 121 (Jan.) to 113 (Aug.) ; Lacka- 
wanna 99 (Jan.) to 112 (Feb.) ; 111. Cent. 108 
(Feb.) to 90 (Oct.) ; Louis. & Nash. 53 (Jan.) 
to 59 (Feb.) ; N. Y. Cent. 105 (Mch.) to 95 
(May) r New Haven 122 (Jan.) to 139 (Nov.). 

1875 AVERAGE 87-100 

Cent, of N. J. ranged from 120 (April) to 
99 (Oct.) ; St. Paul 40 (April) to 28 (June) ; 
Del. & Hud. no (Feb.) to 124 (Dec.) ; Lack- 
awanna 106 (Jan.) to 123 (April) ; 111. Cent. 
106 (April) to 88 (Oct.) ; Louis. & Nash. 40 
(Feb.) to 36 (April) ; N. Y. Cent. 100 (May) 
to 107 (May) ; New Haven 133 (Jan.) to 147 
(Dec). 



RANGE OF STOCK 31ARKET 29 

1876 AVERAGE 62-100 

Cent, of N. J. ranged from 109 (Feb.) to 21 
(Sept.); St. Paul 46 (Feb.); to 18 (Nov.); 
Del. & Hud. 125 (Jan.) to 61 (Oct.) ; Lacka- 
wanna 120 (Jan.) to 64 (Oct.) ; 111 Cent. 103 
(Mch.) to 60 (Dec.) ; Louis. & Nash. 32 
(April) to 24 (Dec); N. Y. Cent. 117 (Feb.) 
to 96 (Sept.) ; New Haven 146 (Jan.) to 159 
(Mch.) ; Pullman 70 (Jan.) to 85 (April). 

1877 AVERAGE 48-76 

Cent, of N. J. ranged from 37 (Jan.) to 6 
(June) ; St. Paul 11 (April) to 42 (Oct.) ; Del. 
& Hud. 74 (Jan.) to 25 (June) ; Lackawanna 
'jj (Jan.) to 30 (June) ; 111. Cent. 40 (April) to 
79 (Oct.) ; Louis. & Nash. 26 (Mch.) to 40 
(Dec.) ; N. Y. Cent. 85 (April) to 109 (Oct.) ; 
New Haven 146 (April) to 158 (Dec.) ; Pull- 
man 75 (Feb.) to 71 (Mch.). 

1878 AVERAGE 61-76 

Cent, of N. J. ranged from 13 (Jan.) to 45 
fjuly) ; St. Paul 54 (June) to 2y (Sept.) ; Del. 
& Hud. 59 (July) to 34 (Dec.) ; Lackawanna 
61 (July) to 41 (Dec.) ; 111. Cent. 72 (Feb.) 
to 85 (June) ; Louis. & Nash. 35 (Oct.) to 39 
(Dec.) ; N. Y. Cent. 103 (Mch.) to 115 (Sept.) ; 
New Haven 153 (Jan.) to 162 (Nov.) ; Pull- 
man 72 (Feb.) to 80 (July). 



30 BUSINESS BAROMETERS 

1879 AVERAGE 66-106 

Cent, of N. J. ranged from 33 (Jan.) to 89 
(Nov.) ; St. Paul 34 (Jan.) to 82 (Nov.) ; Del. 
& Hud. 38 (Feb.) to 89 (Nov.) ; Lackawanna 
43 (Jan.) to 94 (Nov.) ; 111. Cent. 79 (Mch.) 
to 100 (Dec.) ; Louis. & Nash. 35 (Feb.) to 
89 (Dec.) ; N. Y. Cent. 112 (Mch.) to 133 
(Oct.) ; New Haven 171 (June) to 154 (Nov.) ; 
Pullman 73 (Jan.) to 109 (Nov.). 

1880 AVERAGE 87-131 

Cent, of N. J. ranged from 85 (April) to 45 
(May) ; St. Paul 66 (May) to 114 (Dec.) ; Del. 
& Hud. 60 (May) to 92 (Dec.) ; Lackaw^anna 
68 (May) to no (Dec); 111. Cent. 99 (Jan.) 
to 127 (Dec.) ; Louis. & Nash. 173 (Nov.) to 
yy (Dec.) ; N. Y. Cent. 122 (May) to 155 
(Dec.) ; New Haven 155 (Jan.) to 180 (O'ct.) ; 
Pullman 107 (Jan.) to 146 (Jan.), 

1881 AVERAGE 1 10-137 

Cent, of N. J. ranged from 82 (Jan.) to 11^ 
(Feb.) ; St. Paul loi (Feb.) to 129 (June) ; 
Del. & Hud. 89 (Jan.) to 115 (Mch.); Lacka- 
wanna 1 01 (Jan.) to 131 (Mch.) ; 111. Cent. 
124 (Jan.) to 146 (May) ; Louis. & Nash. 79 
(Feb.) to no (May) ; N. Y. Cent. 155 (Jan.) ; 
to 130 (Dec.) ; New Haven 164 (Mch.) to 190 
(June); Pullman 120 (Jan.) to 150 (Jan.). 



RANGE OF STOCK MARKET 31 

1882 AVERAGE 94-134 

Cent, of N. J. ranged from 93 (Feb.) to 6^ 
(Nov.); St. Paul 128 (Sept.) to 96 
(Nov.) ; Del. & Hud. 102 (Mch.) to 119 
(Aug.) ; Lackawanna 116 (April) to 150 
(Sept.) ; 111. Cent. 127 (Jan.) to 150 (Oct.) ; 
Louis. & Nash. 100 (Jan.) to 46 (Nov.) ; N. Y. 
Cent. 123 (May) to 138 (Aug.) ; New Haven 
168 (Feb.) to 186 (Feb.) ; Pullman 145 (Jan.) 
to 117 (June). 

1883 AVERAGE 103-121 

Cent, of N. J. ranged from 68 (Jan.) to 90 
(Oct.) : St. Paul 108 (Jan.) to 91 (Dec.) ; Del. 
& Hud. 112 (April) to 102 (Oct.) ; Lackawanna 
131 (April) to III (Oct.) ; 111. Cent. 148 (June) 
to 124 (Aug.) ; Louis. & Nash. 58 (Jan.) to 40 
(Aug.) ; N. Y. Cent. 129 (Mch.) to in (Dec.) ; 
New Haven 169 (Jan.) to 183 (June) ; Pull- 
man 134 (June) to 112 (Dec). 

1884 AVERAGE 80-115 

Cent, of N. J. ranged from 90 (Jan.) to $y 
(Dec.) ; St. Paul 94 (Jan.) to 58 (June) ; Del. 
& Hud. 114 (Feb.) to Gy (Dec.) ; Lackawanna 
133 (Mch.) to 86 (Dec.) ; N. Y. Cent. 140 
(Feb.) to no (June) ; Louis. & Nash. 51 
(Mch.) to 22 (June) ; N. Y. Cent. 122 (Mch.) 
to 83 (Nov.) ; New Haven 184 (May) to 175 
(July); Pullman 117 (Jan.) to 90 (May). 



32 BrSIXESS BAROMETERS 

1S85 AVER-\GE 83-113 
Cent, of X. J. ranged from 31 (^Ich.) to 52 
I Aug.) ; St. Paul 64 (June) to 99 (Xov.) ; Del. 
& Hud. 66 (Jan.) to 100 (Xov.) ; Lackawanna 
82 (Jan.) to 129 (Dec.) ; 111. Cent. 119 (Jan.) to 
140 (Dec.) ; Louis. & Xash. 22 (Jan.) to 51 
(Xov.) ; X. Y. Cent. 81 (June) to 107 (Xov.) ; 
Xew Haven 175 (Jan.) to 204 (Dec.) ; Pull- 
man 107 (Jan.) to 137 rXov.). 

1886 AA'ERAGE 102-123 

Cent, of X'. J. ranged from 42 (Jan.) to 64 
• Sept.); St. Paul S2 (May) to 99 (Sept.); 
Del. & Hud. S7 rjan.) to '108 (Feb.) ; Lack- 
awanna 115 Qan.) to 144 (Dec.) ; 111. Cent. 
143 (Feb.) to 130 (Dec.) ; Louis & X'ash. 33 
('May) to 69 (Dec.) ; X'. Y. Cent. 98 r:\Ich.) to 
117 (Oct.) ; X'ew Haven 204 (Jan.) to 223 
(;Xov.): Pullman 128 (May) to 147 (Oct.). 

1887 AA'ERAGE 104-124 

Cent, of X'. J. ranged from 64 (May) to 47 
(July); St. Paul 95 TMay) to 65 (Oct.); Del. 
& Hud. 96 (Sept.) to 106 fXov.) ; Lackawanna 
139 (June) to 123 (Oct.) ; 111. Cent. 138 (May) 
to 114 I'Oct.) ; Louis. & Xash. 70 (April) to 
54 (Oct.); X. Y. Cent. 114 f;May) to loi 
(Oct.) ; New Haven 208 TFeb.) to 233 (May) ; 
Pullman 159 ('May) to 136 (Xov.). 



E a:\ge of stock market 33 

1888 AVERAGE 102-129 

Cent, of N. J. ranged from y-^ (April) to 95 
(Dec.) ; St. Paul 78 (Feb.) to 59 (Dec.) ; Del. 
& Hud. 103 (Jan.) to 134 (Dec.) ; Lackawanna 
123 (April) to 145 (Oct.) ; 111. Cent. 123 
(Aug.) to 113 (Dec.) ; Louis. & Nash. 64 (Jan.) 
to 50 (April) ; N. Y. Cent. 102 (April) to iii 
(Sept.) ; New Haven 215 (Jan.) to 244 (Dec.) ; 
Pullman 135 (April) to 175 (Sept.). 

1889 AVERAGE 123-144 

Cent, of N. J. ranged from 92 (Mch.) to 131 
(Oct.) ; St. Paul 60 (Mch.) to 75 (June) ; Del. 
& Hud. 130 (Mch.) to 156 (Sept.); Lacka- 
wanna 134 (April) to 151 (Sept.) ; 111. Cent. 
106 (Feb.) to 118 (Dec); Louis. & Nash. 56 
(Jan.) to 87 (Nov.) ; N. Y. Cent, no (Feb.) to 
104 (July) ; New Haven 241 (Jan.) to 279 
(Sept.); Pullman 189 (Jan.) to 193 (Jan.). 
1890 AVERAGE 98-141 

Cent, of N. J. ranged from 128 (May) to 92 
(Nov.) ; St. Paul 78 (May) to 44 (Nov.) ; Del. 
& Hud. 140 (April) to 120 (Dec.) ; Lackawanna 
149 (July) to 123 (Nov.) ; 111. Cent. 120 (Jan.) 
to 85 (Nov.) ; Louis. & Nash. 92 (May) to 65 
(Nov.) : N. Y. Cent, in (June) to 95 (Dec.) ; 
New Haven 224 (Jan.) to 270 (June) ; Penn- 
sylvania 95 to 113; Pullman 222 (July) to 160 
(Dec). 



34 BUSINESS BAROMETEKS 

1891 AVERAGE 95-138 

Cent, of N. J. ranged from 122 (April) to 
105 (June) ; St. Paul 51 (Mch.) to 82 (Dec.) ; 
Del. & Hud. 140 (Sept.) to 120 (Dec.) ; Lack- 
awanna 130 (July) to 145 (Sept.) ; 111. Cent. 
90 (Mch.) to 109 (Dec); Louis. & Nash. 65 
(Aug.) to 83 (Dec.) ; N. Y. Cent. 98 (July) to 
119 (Dec); New Haven 271 (Feb.) to 24 
(Nov.); Pennsylvania 99 to 115; Pullman 196 
<Jan.) to 172 (Nov.). 

1892 AVERAGE 122-142 

Cent, of N. J. ranged from 11 1 (Jan.) to 145 
(Feb.) ; St. Paul -j^:, (April to 84 (Aug.) ; Del. 
& Hud. 122 (Jan.) to 149 (April) ; Lacka- 
wanna 138 (Jan.) to 167 (Feb.) ; 111. Cent, no 
(Jan.) to 95 (Sept.) ; Louis. & Nash. 84 (Jan.) 
to 64 (Sept.); N. Y. Cent. 119 (Mch.) to 107 
(Sept.) ; New Haven 224 (Jan.) to 252 (June) ; 
Pennsylvania 106 to 114; Pullman 184 (Jan.) 
to 200 (May). 

1893 AVERAGE 98-130 

Cent, of N. J. 132 (Jan.) to 84 (July) ; St. 
Paul 83 (Jan.) to 46 (July) ; Del. & Hud. 139 
{Jan.) to 102 (July) ; Lackawanna 127 (July) 
to 175 (Nov.) ; 111. Cent. 104 (Jan.) to 86 
(July) ; Louis. & Nash, 'j'j (Jan.) to 39 (Dec.) : 
N. Y. Cent, in (Jan.) to 92 (July) ; New 
Haven 262 (Jan.) to 188 (Sept.) ; Pennsyl- 



KAJN GE OF STOCK JVIAKKET 35 

vania 93 (Dec.) to iii (Jan.); Pullman 206 
(April) to 132 (Aug.). 

1894 AVERAGE 105-123 

Cent, of N. J. ranged from 117 (Mch.) to 87 
(Dec.) ; St. Paul 54 (Jan.) to 67 (Sept.) ; Del. 
& Hud. 144 (April) to 119 (Oct.) ; Lackawanna 
174 (Sept.) to 155 (Oct.) ; 111. Cent. 95 (Sept.) 
to 82 (Dec.) ; Louis. & Nash. 40 (Jan.) to ^y 
(Sept.) ; N'. Y. Cent. 95 (May) to 102 (Aug.) ; 
New Haven 178 (July) to 197 (Dec.) ; Pennsyl- 
vania 96 (Jan.) to 104 (Apr.) ; Pullman 174 
(Apr.) to 152 (July) . 

1895 AVERx\GE 103-128 

Cent, of N. J. ranged from 81 (Feb.) to 116 
(Sept.); St. Paul 53 (Mch.) to 78 (Sept.); 
Del. & Hud. 134 (Sept.) to 118 (Dec); Lack- 
awanna 174 (Oct.) to 154 (Dec.) ; 111. Cent. 
81 (Jan.) to 106 (Sept.) ; Louis. & Nash. 66 
(Sept.) to 39 (Dec.) ; N. Y. Cent. 104 (x\ug.) 
to 90 (Dec.) : New Haven 218 (June) to 174 
(Dec.) ; Pennsylvania 97 (Jan.) to 115 (Sept.) ; 
Pullman 178 (June) to 146 (Dec). 

1896 AVERAGE 100-119 

Cent, of N. J. ranged from 87 (Aug.) to no 
(Nov.) ; St. Paul 59 (Aug.) to 80 (Nov.) ; Del. 
& Hud. 129 (Feb.) to 114 (Aug.) ; Lackawanna 
166 (June) to 138 (Aug.) ; 111. Cent. 98 (Jan.) 
to 84 (Aug.) ; Louis. & Nash. 55 (Feb.) to 2i7 



36 BUSINESS BAROMETERS 

(Aug.); N. Y. Cent. 99 (Feb.) to 88 (Aug.); 
New Haven 184 (Jan.) to 160 (July) ; Penn- 
sylvania 99 to 109; Pullman 164 (Feb.) to 138 
(Aug.). 

1897 AVERAGE 103-117 

Cent, of N'. J. ranged from 103 (Jan.) to 68 
(May); St. Paul 69 (April) to 102 (Sept.); 
Lx)uis. & Nash. 99 (April) to 123 (Sept.): 
Lackawanna 164 (May) to 164 (Aug.) ; 111. 
Cent. 91 (April) to no (Aug.) ; Louis. & Nash. 
40 (April) to 63 (Sept.) ; N. Y. Cent. 92 (Feb.) 
to 115 (Sept.) ; New Haven 160 (Feb.) to 185 
(Sept.) ; Pennsylvania 103 (Jan.) to 119 
(Sept.) ; Pullman 152 (Jan.) to 185 (Sept.) 

1898 AVERAGE 106-133 

Cent, of N. J. ranged from 84 (Nov.) to 99 
(Dec.) : St. Paul 83 (April) to 120 (Dec.) ; 
Del. & Hud. 114 (Feb.) to 93 (Nov.); Lack- 
awanna 159 (Feb.) to 140 (Oct.) ; 111. Cent. 
96 (April) to 115 (Dec.) ; Louis. & Nash. 44 
f April) to 65 (Dec.) ; N. Y. Cent. 105 (Mch.) 
to 124 (Dec.) ; New Haven 178 (Jan.) to 201 
(Dec.) ; Pennsylvania no (Mch.) to 123 
(Dec); Pullman 216 (July) to 132 (Nov.). 

1899 AVERAGE 123-15 1 

Cent, of N. J. ranged from 97 (Jan.) to 126 
Nov.); St. Paul 136 (Sept.) to 112 (Dec); 
Del. & Hud. 106 (Jan.) to 135 (Sept.) ; Lack- 



RAXGE OF STOCK MARKET 37 

awanna 157 (Jan.) to 194 (Oct.) ; 111. Cent. 122 
(Jan.) to 105 (Dec.) ; Louis. & Nash. 63 (Mch.) 
to 88 (Oct.) ; N. Y. Cent. 144 (Mch) to 120 
(Dec.) ; New Haven 198 (Jan.) to 222 (April) ; 
Pennsylvania 122 (Jan.) to 142 (Jan.) ; Pull- 
man 156 (Jan.) to 207 (Oct.). 

1900 AVERAGE 134-165 

Cent, of N. J. ranged from 115 (Jan.) to 150 
(Dec): St. Paul 108 (June) to 148 (Dec); 
Del. & Hud. 106 (Sept.) to 134 (Dec) ; ^'Gt. 
Northern 211 (June) to 276 (Dec.) ; 111. Cent. 
no (June) to 132 (Dec.) ; Louis. & Nash. 68 
(Sept.) to 89 (Dec) ; N. Y. Cent. 125 (June) 
to 145 (Dec) ; New Haven 215 (Jan.) to 207 
(Sept.) ; Pennsylvania 124 (Sept.) to 149 
(Dec.) ; Pullman 176 (June) to 204 (Dec). 

*Great Northern is substituted here for Lack- 
awanna with the Ore Certificates added from 
1900 to 1907. 

1901 AVERAGE 148-190 

Cent, of N. J. 145 (Jan.) to 196 (Dec.) ; St. 
Paul 134 (May) to 188 (May) ; Del. & Hud. 
185 (April) to 105 (May) ; Gt. Northern 208 
(Mch.) to 167 (May) ; 111. Cent. 124 (May) to 
154 (June) ; Louis. & Nash. y6 (May) to in 
(June) ; N. Y. Cent. 129 (Jan.) to 174 (Nov.) ; 
NjCw Haven 206 (Feb.) to 217 (June) ; Penn- 
sylvania 161 (April )to 137 (May) ; Pullman 



38 BUSINESS BAROMETERS 

195 (Jan.) to 225 (Oct.). 

1902 AVERAGE 168-201 

Cent, of N. J. ranged from 198 (Jan.) to 165 
(Nov.); St. Paul 160 (Jan.) to 198 (Sept.); 
Del. & Hud. 184 (Jan.) to 153 (Nov.); Gt. 
Northern 181 (Mch.) to 203 (Dec.) ; 111. Cent. 
137 (Jan.) to 173 (Aug.) ; Louis & Nash. 102 
(Jan.) to 159 (Aug.) ; N. Y. Cent. 168 (Jan.) 
to 147 (Nov.) ; New Haven 209 (Jan.) to 225 
(April) ; Pennsylvania 147 (Jan.) to 170 
(Sept.); Pullman 215 (Jan.) to 250 (April). 

1903 AVERAGE 149-190 

Cent, of N. J. ranged from 190 (Jan.) to 153 
(Oct.); St. Paul 183 (Jan.) to 133 (Aug.); 
Del. & Hud. 183 (Feb.) to 149 (Aug.) ; Gt. 
Northern 209 (Jan.) to 160 (Oct.) ; 111. Cent. 
151 (Jan.) to 125 (July) ; Louis. & Nash. 130 
(Jan.) to 95 (Sept.); N. Y. Cent. 156 (Jan.) 
to 112 (July) ; New Haven 225 (Jan.) to 187 
(May) ; Pennsylvania 157 (Jan.) to no 
(Nov.); Pullman 235 (Jan.) to 196 (July). 

1904 AVERAGE 152-192 

Cent, of N. J. ranged from 154 (Feb.) to 194 
(Nov.); St. Paul 137 (Feb.) to 177 (Dec); 
Del. & Hud. 149 (Mch.) to 190 (Dec.) ; Gt. 
Northern 170 (Mch.) to 242 (Dec.) ; 111. Cent. 
125 (Feb.) to 159 (Dec.) ; Louis. & Nash. loi 



RAJVGE OF STOCK MARKET 39 

(Feb.) to 148 (Dec); N. Y. Cent. 112 (Mch.) 
to 145 (Dec.) ; New Haven 185 (May) to 199. 
(Oct.) ; Pennsylvania 11 1 (Mch.) to 140 
(Dec); Pullman 209 (Mch.) to 242 (Nov.). 

1905 AVERAGE 181-220 

Cent, of N. J. ranged from 190 (May) to 235 
(Oct.): St. Paul i68 (May) to 187 (Aug.): 
Del. & Hud. 178 (May) to 237 (Nov.); Gt. 
Northern 236 (Jan.) to 335 (April) ; 111. Cent. 
152 (Jan.) to 183 (Sept.); Louis. & Nash. 134 
(Jan.) to 157 (Sept.) ; N. Y. Cent. 167 (Mch.) 
to 136 (May); New Haven 216 (Sept.) to 191 
(Dec) ; Pennsylvania 131 (May) to 148 
(Aug.) ; Pullman 230 (May) to 258 (Aug.). 

1906 AVERAGE 163-210 

Cent, of N. J. ranged from 204 (May) to 239 
(May); St. Paul 189 (Nov.) to 146 (Dec); 
Del. & Hud. 209 (Mch.) to 189 (May); Gt. 
Northern 348 (Feb.) to 178 (Dec); 111. Cent. 
164 (May) to 184 (June) ; Louis. & Nash. 156 
(Jan.) to 136 (May) ; N. Y. Cent. 156 (Jan.) 
to 126 (Nov.) ; New Haven 204 (Jan.) to 189 
(Dec) ; Pennsylvania 147 (Jan.) to 122 (July) ; 
Pullman 270 (Nov.) to 180 (Dec.) 

1907 AVERAGE 1 16-184 

Cent of N. J. ranged from 220 (Jan.) to 144 
(Oct.) ; St. Paul 157 (Jan.) to 93 (Nov.) ; Del. 
& Hud. 22y (Jan.) to 124 (Nov.) ; Gt. North- 



40 BUSINESS BAROMETERS 

ern 274 (Jan.) to 144 (Nov.); Ill Cent. 172 
(Jan.) to 116 (Nov.) ; Louis. & Nash. 145 (Jan.) 
to 85 (Nov.) ; N. Y. Cent. 134 (Jan.) to 89 
(Nov.) ; New Haven 189 (Jan.) to 127 (Nov.) ; 
Pennsylvania 141 (Jan.) to 113 (Nov.); Pull- 
man 181 (Jan.) to 137 (Nov.). 

1908 AVERAGE 125-165 
Central of N. J. ranged from 229 (Dec.) to 
160 (Feb.) ; St. Paul 152 (Dec.) to 103 (Jan.) ; 
Del. & Hud. 181 (Dec.) to 141 (Feb.) ; Gt. 
Northern 223 (Dec.) to 162 (Feb.) ; Illinois 
Central 150 (Nov.) to 122 (Feb.) ; Louis. & 
Nash. 126 (Dec.) to 87 (Feb.) ; N. Y. Cent. 
126 (Dec.) to 90 (Jan.) ; New Haven 161 (Nov.) 
to 128 (Jan.) ; Pennsylvania 132 (Dec.) to 109 
(Jan.) ; Pullman 174 (Jan.) to 147 (Jan.). 

Possibilities of Profit in Conservative In- 
vestment Stocks. 

Suppose $2,500 had been invested in i860, in 
the stocks given in the preceding pages, and they 
had been bought and sold again, every three or 
four years, what would have been the history of 
that $2,500? To what would it have amounted 
to-day? 

In detail the answer would be as follows: 
Starting in 1861 with an original principal of 



possibiijIties of profit 41 

$2,500 and the interest (we use only simple in- 
terest instead of compound interest) for three 
and one-half years at 5%, amounts to $438.00. 
The $2,500 we invest in the leading stocks of 
1 86 1 at their average low price (as given in the 
preceding chapter) of 60, and hold the stocks 
for said 3^ years until the average price reach- 
es I60 in 1865, when we sell for $6,56o which* 
together with the interest above mentioned* 
makes a total of $6998. We leave this amount 
on deposit in a bank for two years at 4%, so that 
we have $7,569 to invest in 1867 when the av- 
erage again falls to 100. We think that with 
this introduction the table is self-explanatory. 

Original Principal in- 
vested @ 60% 1861 $ $2,500 

Dividends 3 J yrs. @ 5% to 1 865 438 

Prin. bought @ 60-1681 

sold @ 160 1865 6,560 

Total of Prin. & Divi- 
dends @ 5% 1865 6,998 

Comp. Int. @ 4% 2 yrs. 

P. & 1 1867 7.569 

Invested at 100 in 1867 . . 

Dividends 2 yrs. @ 5% to 1869 756 

Prin. bought @ 100-1867 

sold 160 1869 12,000 

Total of Prin. and Divi- 
dends @y 5% 1869 12,756 



42 BUSINESS BAROMETTEHS 

Comp. Int. @ 4% 4 yrs. 

P. & 1 1873 14,920 

Invested at 75 in 1877 

Dividends i yr. @ 5% to 1874 746 

Prin. bought @ 75-1873 

sold @ no 1874 21,780 

Total of Prin. & Divs. 

@5% to 1874 22,526 

Comp. Int. @ 4% 3| yrs. 

P. &I 1877 25,844 

Invested at 50 in 1877. 

Dividends 4 yrs. @ 5% to 1881 5, 168 

Prin. bought @ 50-1877 

sold @ 140 1881 72,240 

Total of Prin. and Divs. 

@5% 1881 77,408 

Comp. Int. @ 4% 4 yrs. 

P. &i 90,442 

Invested at 85 in 1885 

Dividends 4 yrs. @ 5% to 1889 18,108 

Prin. bought @ 85-1885 

sold @ 140 1889 149,100 

Total of Prin. and Divs 

@5% 1889 167,208 

Comp. Int. @ 4% li yrs. 

P. & 1 1891 177.275 

Invested at 95 in 1891, 

Dividends i yr. @ 5% to 1892 8,868 

Prin. bought @ 95-1891 

sold @ 140 1892 261,380 

Total of Prin. and Divs. 

@ 5% 1892 270,248 

Comp. Int. © 4% 5 yrs. 

P. & 1 1897 328,794 



POSSIBILITIES OF PROFIT 43 

Invested at loo in 1897. 

Dividends 6 yrs. @ 5% to 1903 98,634 

Prin, bought © 100-1897 

sold @ 200 1903 657,400 

Total of Prin. & Divs. 

@ 5% 1903 756,034 

Comp. Int.@ 4% I yr.P. & 1. 1904 786,275 

Dividends 3 yrs. @ 5% 

through Dec 1906 1 17,939 

Princ. bought @ 152-1904 

sold @ 210 in Dec 1906 1, 100,610 

Total of Prin. & Divs. @ 

5% through Dec 1906 1,218,549 

Comp. Int. @ 4% I yr. to 

Dec. P. & 1 1907 1,267,291 

Divs. I yr. & i mo. @ 5% 

to Jan 1909 68,645 

Principal 165 in Jan. . . . 1909 1,802,625 

In the above table 5% is allowed as an av- 
erage dividend on the stocks held and 4% an 
average interest on the bank deposits. 

The preceding example shows that $2,500 con- 
servatively invested in a few standard stocks 
about forty-eight years ago would today amount 
to over $1,800,000. These not only are strictly 
investment stocks, but also are stdcks which 
have fluctuated comparatively little in price. This, 
moreover, was possible by giving orders to buy 
or sell only once in every three or four years. 

If other stocks, which were not dividend pay- 
ers, but which have shown greater fluctuations, 
were purchased, and advantage had been taken 



H BUSINESS BAROMETERS 

of the intermediate fluctuations, the $2,500 would 
have amounted to much larger figures. By in- 
termediate movemients is not meant the weekly 
movements which the ordinary professional op- 
erator notes, but the broader movements ex- 
tending over many months and possibly a year 
or more. Nevertheless, these intermediate move- 
ments should not be noticed by a conservative 
investor, as it is possible to correctly diagnose 
only the major movements extending over three 
or four years. However, many brokers believe 
that it is possible to discern also these intenned- 
iate movements of six or eight months ; and if 
so the following results would be possible." 

$5,000 invested in "St. Paul" in 1870 would 
amount to over $10,000,000 today. 

$5,000 invested in "Union Pacific" in 1870 
vrould amount to over $15,000,000 today. 

$5,000 invested in- "Central of New Jersey" 
would amount to over $30,000,000 today. 

$5,000 invested in "Northern Pacific" would 
amount to over $50,000,000 today. 

These figures, moreover, are not based on the 
supposition of the investor selling at the top of 
every rise or buying at the bottom of every 
decline; but that the purchaser receives only an 
average "high" and average "low." A con- 
servative investor, however, will not "put all his 



POSSIBILITIES OF PKOFIT 45 

eggs into one basket," especially in a speculative 
basket; for, if one can build an investment of 
$5,000 up to $1,000,000 in about thirty years 
with little risk, he is satisfied and will not, for 
the sake of obtaining greater profits, assume 
additional risk. 

Not only is it possible to create a fortune 
through conservative investments, but this is 
practically the only method which is safe and 
can be depended upon. This is owing to the fact 
that all other methods come under the head of 
''accumulation by arithmetical progression" 
rather than "accumulation by geometrical pro- 
gression." 

In order to build an investment of $5,000 up 
to $1,000,000 in thirty years by earning and 
saving, a man must accumulate about $25,000 
a year, or $100,000 continually every four years, 
without a break. This is almost an impossibility 
so far as the average man is concerned and the 
feat is simply made greater or less in direct pro- 
portion to the amount. That is, to build up a 
fortune of $200,000 requires a laying aside of 
several thousand dollars every year in addition 
to allowing all interest to accumulate and to 
build up a fortune of a few millions requires that 
one should make, exclusively in his business, 
more money each year than almost any one man 



46 BUSINESS BAROIrlETEKS 

who holds no stocks or bonds is making in his 
business today. 

This can best be illustrated as follows : — If 
one has $i,ooo invested in only ten shares of 
stock, it does not seem very wonderful for it to 
double in value in three or four years, enabling 
its sale for $2,000, which is at a profit of $1,000. 
This is due to the fact that one is accustomed 
to the thought of handling $1,000; yet with $100,- 
000 in the same stock, it would just as surely 
become $200,000, giving a profit of $100,000. 

In other words, at the beginning there is little 
difirerence between "Arithmetical" and "Geo- 
metrical" Progression, as $1,000 added to 
$1,000 amounts to $2,000, the same as if mul- 
tiplied by tvro. After accumulating $100,000, 
however, it makes a tremendous difference 
whether one adds $1,000 miaking the amount 
$101,000, or multiplies said amount by two, mak- 
ing the amount $200,000. It is for this reason, 
that it is not only possible to create a great for- 
tune through conservative invesments, but 
that this is probably the safest way it can be ac- 
complished. 

A further illustration of the dift'erence between 
"Arithmetical" and "Geometrical" Progression 
may be more striking, viz : 

By Arithmetical Progression only about 150,- 
000 days have elapsed since Columbus dis- 



POSSIBILITIES OF PROFIT 47 

covered America and only about 1,000,000 
hours have elapsed since George Washing- 
ton was president of the United States. 

By Geometrical Progression: $5,000 invested 
in Union Pacific stock in 1870 would today 
amount to $50,000,000 provided the holder once 
or twice a year sold his holdings or reinvested 
his money according to market conditions. 

The Possibilities of Profits in Bonds 

For the benefit of readers who confine their 
purchases strictly to bonds, the following tables 
will be found of great interest. Although bonds 
do not present nearly as great an opportunity 
for profit as stocks, yet it will be seen that there 
is often an opportunity of obtaining an average 
profit of from 10% to 20% in addition to the 
interest received. 

From every point of view a study of these 
tables clearly shows that the study of Funda- 
mental Statistics is of great value even to the 
banker or investor who purchases only bonds. 
If he buys with the idea of selling again, a study 
of Fundamental Statistics is absolutely essential. 
If one buys for permanent investment only, the 
study is not essential but by showing a purchaser 
when to buy, Fundamental Statistics will save 
him an average of about 10% on all purchases. In 
order that the reader may not think that these 
tables were prepared by us in the interests of 
the study of Fundamental Statistics we take 
pleasure in stating that they were prepared by 
a leading New York investment house; whose 
natural object would be to show that bonds 
fluctuate verv little. 



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53 




CHAPTER III. 

COMMODITY PRICE:s SINCE 1860 AND PROFIT POS- 
SIBILITIES EGR MERCHANTS. 

knowledge of Fundamental Statis- 
tics is as important to merchants 
and manufacturers as to the inves- 
tor. The commodity market offers 
almost as great an opportunity for 
profit as the stock market. Capital invested in 
commodities should not depend upon chance for 
its development. To the merchant or anyone 
else interested wholly or in part in the price 
movement of crops, manufactures, raw material 
or merchandise, general figures on underlying 
conditions, controlling demand and supply, are 
essential. 

To know when to buy and when to sell com- 
modities, in order to take advantage of the larger 
swings of the market, the merchant must know 
what the present conditions are and which way 
the pendulum is swinging. To know how soon 
to curtail credits extended to customers, and call 
in the cash that will be needed to save his cap- 
ital, when loans cannot easily be renewed, he 
must watch underlying conditions. Keeping his 
eyes only on the details of his own business will 



RAXGE OF COOIODITY 3IARKET 55 

not enable him to avoid "hard times." Moreover, 
by broadening his study, he is able greatly to 
increase his profits, as well as to eliminate losses. 

The study of twenty-five important factors like 
those described in subsequent chapters of this 
book, by methods similar to those there out- 
lined, results in the perception of clearly de- 
fined industrial movements in the past and shows 
the bearing these factors are having to-day in 
commerce and industry, as well as on the mone- 
tary and stock market outlook. Great fortunes 
have been m.ade, the history of which revealed 
the fact that their possessors had a very accurate 
knowledge of approaching conditions, because of 
a keen understanding of underlying conditions. 

As an illustration of possible profits that can 
be made simply by the purchase and sale of com- 
modities in connection with a study of Funda- 
mental Statistics, the following problem is sub- 
mitted. Starting with a capital of a little over 
fifty thousand dollars, ten commodities were sel- 
ected for purchasing. Bought first in i860, they 
were sold and bought again at intervals of 
from three to seven years, according to what the 
figures on "underlying conditions" indicated. The 
prices used are those given in the closing para- 
graphs of this chapter and no departure from the 
years selected was made, except where there was 



56 BUSIXESS BAROMETERS 

a choice of either of two years. In such cases, it 
was assumed that the purchaser would buy later, 
sell earlier, or leave more cash on deposit as the 
conditions warranted. The original proportion 
of the different articles has been kept the same; 
and the sum, added to the principal on deposit in 
the intervals between buying and selling, has been 
reckoned at simple interest at 4%. Since all 
commodities are not affected alike by the same 
conditions, slight losses were allowed to occur 
as they would naturally. The resulting amount 
shows that in about forty-five years, $53,755.10 
becomes $802,618.41; or that $1,000,000 would 
become $15,400,000. By working a similar prob- 
lem with a single commodity, there would also 
be a distinct profit; for example, if $53,000 was 
invested in iron in i860, it would have equalled 
to-day about $2,000,000. This clearly demon- 
strates that even the great mercantile fortunes 
have been acquired by taking advantage of the 
same laws and changes that give opportunities of 
profit to the banker and the investor. 

Problem Illustrating Profits Derived From Trans- 
actions in Commodities Using Fundamental 
Statistics as a Guide to When to Buy and Sell, 
1860 to 1909. 



RAXGE OF COMMODITY MARKET 57 

Basis: i,ooo tons iron; 5,000 bushels wheat; 
5,000 bushels corn; 10,000 lbs. cotton; 10,000 lbs. 
sugar; 10,000 lbs. wool; 10,000 lbs. coffee; 1,000 
lbs. rubber; 500 barrels pork; 10,000 lbs. copper. 

PRICES SAME AS AT END OF CHAPTER. 

Original Purchase 

i860 $53755-10 

First Sales 1864 132,623.25 

Capital on Dep. 3 yrs. 

@4% simp. int. P 

& I 1867 148,538.04 

Second Purchase 

1868 $145,746,331-3 

Sales (+8-9) ..1872 168,198.00 
Int. on $2,792.71 @ 

4% P & I ...1872 3.351-25 

Amt. of capital after 

2nd Transaction. . . 171,549.25 

Capital on deposit 5 

yrs. 4% P & I 1877 205,859. 10 

Third purchase 

1878 202,942.08 

Sales (+4.9) ..1882 288,585.50 
Int. on $2,917.02 

3 yrs. @ 4% P & I 

1882 3,267.06 



58 BUSINESS BAROMETERS 

Amt. of capital after 

3rd. transaction .. 291,852.56 

Capital on dep. 2 yrs. 
4% P & I . . .1884 315,200.76 

Fourth Purchase 

1885 314,448.00 

Sales (+8) ...1892 338,746.00 

Int. on %'j'^2..'/^ 7 yrs. 

4% P & I ...1892 963.53 

Amount of Capital af- 
ter 4th transaction 3395709-93 

Capital on dep. 3 yrs. 

@ 4% P & I . . 1896 380,475 . 12 

Fifth purchase 

1896 377,907.20 

. 1902 574,745.60 

Int. $2,567.92 6 yrs. 

4% P & I ...1902 3,184.22 

Amount of capital af- 
ter 5th transaction 577,929.82 

Capital on deposit 
year. 4% P & I 1904 601,047 12 

Sixth Purchase 

,...1904 600,315.00 

Int. on $732.01 3 yrs. 

P & I 1907 819.85 

Amount of capital af- 
ter 6th transaction 771,748.47 



RANGE OF COM3IODITY MARKET 59 

Capital on Deposit i 

yr. 4fo P & I to 

Jan. I, 1909 802,618.41 

When one realizes that if a capital of $50,000 
could have been increased to over $800,000 in 
less than fifty years, simply by a study of Funda- 
mental Statistics and without borrowing any 
money or purchasing any but suitable commod- 
ities, the great value of this subject to the mer- 
chant becomes evident. This moreover is accom- 
plished without any salesman, overhead charges, 
or any employees. If to these figures we 
should add the natural profit derived from 
buying at wholesale and selling at retail, or an 
average manufacturing profit, the $50,000 would 
becomxC nearly $20,000,000. Thus a capital of 
$2,500 would accrue to over $1,000,000 by com- 
bining either the manufacturer's or retailer's 
profit with a knowledge of Fundamental Statis- 
tics. 

The largest manufacturmg and mercantile 
firms collect data under twelve headings, or on 
about twenty-five subjects, as follows : 

I. Building and Real Estate: (i) Building 
Operations and Fire Losses ; 

II. Money Conditions: (2) Money in Circu- 
lation, (3) Comptroller's Reports, (4) Loans of 
the Banks, (5) Cash Held by the Banks, (6) 



60 BUSINESS BARO^IETERS 

Deposits of Banks, (7) Surplus Reserves of 
Banks ; 

III. Bank Clearings: (8) Total Bank Clear- 
ings, (9) Bank Clearings Excepting New York; 

IV. Investment Market: (10) Stock Exchange 
Transactions, (11) New Securities; 

V. Business Failures: (12) Failures, by- 
number," amount and percentage ; 

VI. Labor Conditions: (13) Immigration 
Figures ; 

VII. Foreign Trade: (14) Imports; (15) 
Exports, (16) Balance of Trade ; 

VIII. Gold MoTements: (17) Gold Exports 
and Imports, (18) Domestic and Foreign Money 
Rates, and Exchange; 

IX. Social Conditions: (19) Political Factors ; 

X. Commodity Prices: (20) Production of 
Gold: (21) Commoidty Prices. 

XL Condition of Crops: (22) Crop Condi- 
tions and other Commodity Production. 
XII. Railroad Earnings: (23) Gross and Net 
Earnings; (24) Idle Car Figures; (25) Miscel- 
laneous. 

There are, however, many firms and corpora- 
tions which do not care to collect figures in such 
detail, and they have consolidated, rearranged and 
reduced these twenty-fixve subjects to twelve, as 
follows : — 



RAXGE OF C030iODITY MARKET 61 

Building Operations as determined by New 
Railroad Constructed. 

Money Market as determined by surplus 
reserves or Rates. 

Mercantile Trade as determined by Bank 
Clearings. 

Inzestment Market as determined by 
Stock Market Prices. 

Failures; — ^the Ratio to the number of 
Concerns in Business. 

Labor Conditions as determined by Immi- 
gration Figures. 

Exports and Imports as determined by the 
Total Foreign Trade. 

Gold Mozements and the Financial Condi- 
tion of Foreign Countries. 

Social Statistics with notes on Religious 
and Political Conditions. 

10. Crops determined by the total Production 

of Wheat and Corn. 

11. Commodity Prices as determined by the 

Price of Pig Iron. 
"^'12. General Summary as determined by Rail- 
road Earnings. 
*These are not always tabulated nor plotted. 
Many claim that these twelve subjects, when 
properly studied, cover all the field covered by 
the twenty-five subjects above mentioned. For 



62 BUSINESS BAROMETERS 

instance; instead of studying both "Building 
Operations," and ''Railroad Earnings," they study 
"Miles of New Railroad Constructed," claiming 
that this one subject shows all that the first men- 
tioned two subjects show. In the same way, instead 
of studying "Exports" and "Imports" separately, 
they add them together and study the "Foreign 
Trade." In fact, these ten subjects have by cus- 
tom come to be known among merchants as the 
ten Barometers of Trade. Each is important 
enough in extent to reflect by its good or bad 
state present economic conditions and likewise 
so sensitive to coming events as to unerringly 
foretell good or bad tim.es. 

The number of miles of new railroad construc- 
ted gives a clew not only to what new construc- 
tion work is going on throughout the country, 
but also to railroad earnings, as new construction 
increases and decreases constantly with the in- 
crease and decrease in earnings. Moreover, many 
claim it is possible to forecast railroad earnings 
by the increase and decrease in the new mileage 
constructed. As to the value of figures on rail- 
road earnings or new mileage constructed, it is 
universally admitted that they give a wonderful 
index of the times. Practically all manufactured 
goods, and even the supplies in the local retail 
stores, are shipped by the railroads; therefore, a 



RAXGE OF COOIODITY 3IARKET 63 

weekly record of freight which the railroads are 
carrying serves as a barorxieter of the business of 
all the farmers, manufacturers and merchants of 
the country. Moreover, the steel companies, the 
car and locomotive builders, the coal industry and 
one hundred other industries are directly depend- 
ent on the railroads for their prosperity. There- 
fore, all merchants watch railroad earnings and 
new mileage constructed and always reduce or 
increase their stock of goods in accordance with 
what these reports show. 

Money is the basis of all trade and therefore 
is probably the most sensitive of all barometers. 
Money is the representative in value of all things 
traded in and the scarcity of it seriously hampers 
the manufacturer and merchant. Low money 
rates usually indicate poor present conditions but 
tending toward improved business; while high 
money rates usually signify very prosperous pres- 
ent conditions but often foretell a coming panic. 
The active merchant, however, not only studies 
the money rates of this country, but also the rates 
of the banks of England, France and Germany, 
Each week the Bank of England publishes a 
statement and makes an announcement as to the 
rate of discount at which it will handle first- 
class paper until further notice. This practically 
fixes the discount rate throusfhout Great Britain 



64 BUSINESS BAROMETERS 

and a continued increase or decrease of the rate 
in England, is sure to be followed eventually by 
a similar movement in this country. 

The bank clearings are an extremely good 
barometer of present conditions and are watched 
with keen interest by all successful merchants 
and manufacturers. I\Iany large concerns each 
wtek compare the changes in their total sales with 
the changes in the total bank clearings of the 
country. If they find that bank clearings continu- 
ally show an increase while their sales remain 
fixed, they immediately endeavor to ascertain the 
reason therefore. Moreover, some firms divide 
the country into sections and compare by sections 
their sales with the bank clearings, thus having a 
check on the work of each individual sales office. 

The transactions and prices of the stocks on 
the New York Stock Exchange are classed by 
some with politics, money and crops. The way 
that money is made on the New York Stock 
Exchange, is by anticipating price changes. The 
leading operators have statisticians continually 
studying underlying conditions in order to fore- 
cast future conditions and base their purchases 
and sales, on the information obtained. There- 
fore, a slowly sagging market usually precedes 
a period of depression in general business; and 
a slowly rising market usually precedes prosper- 
ous business conditions, unless the decline or rise 



RAXGE OF C013IODITY MARKET 65 

is artificial or caused by manipulation. In fact, 
if it was not due to manipulation, merchants 
could almost rely on the stock market alone as a 
barometer and let these large market operators 
stand the expense of collecting the data necessary 
for determining underlying conditions. Unfor- 
tunately, however, it is often impossible to dis- 
tinguish between artificial movements and natural 
movements; therefore, although merchants may 
watch the stock market as one of the bar- 
ometers, yet they can give to it safely only a 
sm.all amount of weight. 

Failures, both in number and amount, are es- 
pecially good barometers of the condition of the 
retail trade. By ascertaining each month the 
average number of concerns in active business 
and the number that have failed, the percentage 
of failures may be readily determined. A detailed 
discussion of this subject will be found in Chap- 
ter VI of this book. 

Figures on immigration are carefully studied 
by manufacturers as indicative of the condition 
of the labor market. Thousands of immigrants 
arriving at Ellis Island indicate good present con- 
ditions, with high prices for labor, up to a certain 
point; but too large immigration figures foretell 
a change in conditions followed by a period of 
depression. On the other hand, when large num- 



66 BUSINESS BAROaiETERS 

bers of steerage passengers are leaving the coun- 
try and the incoming steerage is reduced, business 
is in a state of depression, although when the 
tide turns, and immigrants again begin to ar- 
rive, it is a sign that conditions are improving. 

As the bank clearings are used in diagnosing 
present conditions, figures on foreign trade are of 
great value in forecasting future conditions. The 
foreign trade of the country bears the same rela- 
tion to the nation as a whole, as the retail sales 
of a store bear to the financial condition of the 
proprietors. A retailer who for any great length 
of time spends more money than he receives, is 
sure to eventually have trouble, and it is the 
same with a nation. Moreover, as the prosperity 
of the merchant is almost in direct proportion 
to his sales, so is the prosperity of a nation very 
largely dependent upon its volume of foreign 
trade. 

Although gold movements are very important 
for study in forecasting money rates, they, like 
idle car figures, are of no value after the actual 
figures for rates are known. Therefore no furth- 
er reference is made to them in this chapter. 

Regarding politics: Trade is always depend- 
ent upon the wise conduct of our national 
government. War clouds, even although at first 
not involving our own nation, strongly .affect all 



RANGE OF CO>OIODITY IVIARKET 67 

commodity prices. Of course all are not affected 
in the same way, as a war scare increases the 
prices of some commodities and reduces the prices 
of others, but all are aft'ected in some way and 
to some extent. Even the President's message 
and especially tariff discussion and the approach 
of a presidential election, greatly aft'ect com- 
modity prices. 

Of all statistics published by the government 
the most important to the merchant are the Crop 
Reports. Most of the government figures refer 
to what has happened in the past, and many of 
these figures are published a year or more 
after the events happen. In the case of the crops 
however the government actually forecasts, there- 
fore all crop statistics are especially valuable to 
manufacturers and merchants. 

The crops are the mainstay of America, 
because approximately one-half of our popu- 
lation is dependent upon agriculture. Crop 
conditions form the basis of James J. Hill's pre- 
dictions and business ventures, and probably Mr. 
Hill is one of our greatest students of Fundamen- 
tal Statistics. The principal crops, grain and 
cotton, have a tremendous influence upon our 
wealth. Many industries and mercantile firms 
are absolutely dependent on the crops, and com- 
modity prices are always more or less dependent 
thereon. The grain reports and cotton reports 



68 RANGE OF C03I3IODITY MARKET 

issued by the government are watched with great 
interest and manufacturers and merchants even 
watch the weather reports throughout the west, 
the progress of the bollworm, the condition of 
crops in the Argentines and Russia and other 
countries. Good crops usually foretell continued 
prosperity, but poor crops are usually followed 
by a year of uncertain conditions. 

Statistics on the iron industry are useful for a 
number of reasons. It is generally admitted that 
they give a key to present and future conditions 
better than figures on any other one commodity. 
The exactness with which business conditions 
could have been foretold in the past by figures on 
the production and price per ton of pig iron, is 
truly marvelous. ^Moreover, iron is one of the 
first commodities to fall in price and the first to 
rise; therefore all merchants watch the price of 
iron. 

Railroad earnings are extremely instructive 
and are used by some merchants in place of some 
of the above subjects. The most acceptable meth- 
od is to use them as a check on or as supple- 
mentary to said subjects. 

Therefore each of these twelve subjects is inti- 
mately bound up with what is known as "swings" 
during which commodity prices change from 
"high"' to *'low" and the reverse. The history of 



BUSINESS BAROMETERS 69 

all mercantile trade during the past two hundred 
years has been divided into distinct cycles and 
each cycle consists of four periods; a period of 
prosperity, a period of decline, a period of depres- 
sion, and a period of improvement. Each period 
is accompanied with distinct changes in commod- 
ity prices and, by comparison with similar periods 
in previous cycles, it is possible to determine with 
a measurable degree of certainty at about what 
period in one of these "swings" we happen to be. 
If the swing of the pendulum is far out over the 
perpendicular, we are sure that it must "swing" 
just as far back of the centre as forward. 

The suggestion made earlier in this book, must, 
however, be distinctly borne in mind. No coun- 
try can be prosperous unless it is progressive. No 
nation can starud still; it must go either forward 
or backward. Therefore, the normal demands of 
a country for new construction must show an 
increase each year to have conditions even re- 
main constant. There must be a distinct increase 
in order to keep the vast number of our new citi- 
zens busy. Therefore, in comparing the present 
with the past a similar figure does not necessarily 
mean better conditions ; but in many instances 
may mean an actual falling off. This is very 
important and must be remembered. The reader, 
however, will find these subjects discussed in 
detail in a later chapter. 



70 BrSIXESS BAR03IETERS 

Although it is not to be recommended, the 
barometers above mentioned, are by some, divid- 
ed into two divisions, viz: Barometers for de- 
termining Present Mercantile Conditions and 
Barometers for determining Underlying Mer- 
cantile Conditions. 

Figures used for determining present mercan- 
tile conditions : 
I. Miles of New Railroad Constructed. 2. 

Bank Clearings. 3. Failures. 4. Iron 

Industry. 5. Immigration Figures. 6. 

Railroad Earnings. 
Figures used in foretelling future mercantile 
conditions : 
I. Politics. 2. Money. 3. Crops. 4. Stock 

Exchange Prices. 5. Foreign Trade. 6. 

Gold Movements. 
Most firms, instead of interpreting the figures 
on each of the twelve subjects for both present 
and underlying conditions, prefer each month to 
determine what the proper normal figure should 
be for each of these subjects and note the rela- 
tion between the actual figures for present condi- 
tions and these normal figures. The normal 
figure on any one subject is obtained by plotting 
the yearly figures on that subject for a period of 
ten or tw^enty years and by drawing on that plot 




CHART SHOWING PRICES OF LEADING COMMODITIES SINCE 1860. 
The above Dlot« chnw the fluctuation in the prices of commodities and also their relation to changes in the Stock 
Market Plots A and B are duplicates and show the main movements of the Stock Market since 1860. The other 

P'"*** m Whe*{'',/^'*il°^'"f,)'cXn'!1i) Pia'lron. (5) Pork, (6) Copper, (7) Wool, (8) Coffee, (9) Rubber, (10) Sugar 

D .rh g ?lVe wShne «rta^^^ of t'^^ commodities sold at abnormally high prices and s'uch places ^PP'^-^rf broken 
lines in the plot. In the «^ses of cotton and sugar, a larger vertical scale is used for the period from 1«7.* to 1909 
than lor ^^^ P^^odpreyiou^J° l^^^;.^ seriously affected by the war they are not used for studying analytically until 
the mnh- of lS7Trr^"^'*y * .modities to a normal state. Beginning with this depression, we have marked the low points 
w*lth''sho'rt"Ui'i'd%mS\lnerand th^ high points with short dotted vertical lines. There are two%oints of vital interest 

to notice "Vconnection with th.;«/!;;J;^"/s fallen^md risen with every cycle of the Stock Market. 

h^ (n,^ "".'.^y I'"'*' r.V.ich their low point and their high point about two years after the Stock Market reaches 
its low' or mdlTn^"""" ''""".iv^lv This latteV is shown very graphically by the short verticallj^es above mentioned, 
us '**^*Y908 price '^?""""'^^ d from weekly report of Bureau of Commerce and Labor. 



RANGE OF C03010DITY MARKET 71 

a line showing the average trend for the entire 
period. This trend may appear as an Increase or 
a decrease or as a level line. Firms using this 
system obtain the normal figure for any future 
time by assuming that the general direction of 
this normal line will continue the same. More- 
over, In such a plot it is often clearer — in the 
case of some subjects — to plot the relation to a 
ten year average rather than actual figures. This 
is especially true when plotting commodity prices 
and other figures which show a slight variation 
or seasonable changes. 

In addition to the value of Fundamental Sta- 
tistics for determining the trend of demand, sup- 
ply, and prices, they are of even more value for 
determining the amount of credit which manufac- 
turers and merchants should at any time, ex- 
tend to customers; hut as their use in connec- 
tion zvith "credits'^ is so zvell understood, no de- 
tailed explanation is given in this book. 

Prices of Ten Staple Commodities : 
Average Wholesale Price From 1860—1907 

i860 
Wheat $1.37 per bu. ; corn $0.73 per bu. ; cot- 
ton $0.11 per lb.; sugar $0.0988 per lb.; wool 
$0.55 per lb. ; iron $22.70 per ton ; copper $0,2287 
per lb. ; rubber $0.55 per lb. ; pork $20.00 per 
bbl. ; coffee $0.1306 per lb. 



72 BUSINESS BAROMETERS 

1861 

Wheat $1.30 per bu. ; corn $0.60 per bu. ; cot- 
ton $0-1301 per lb.; sugar $o.cSH per lb.; wool 
$0.38 per lb. ; iron $20.26 per ton ; copper $0.2225 
per lb.; rubber $0.55 per lb.; pork $21.00 per 
bbl. ; coffee $0.1275 P^^ lb. 
1862 

Wheat $1,28 per bu. ; corn $0.59% per bu.; 
cotton $0.3129 per lb.; sugar $0.11^ per lb.; 
wool $0.48 per lb.; iron $23.92 per ton; copper 
$0.2187 per lb. ; rubber $0.48 per lb. ; pork $12.25 
per bbl. ; coffee $0,205 per lb. 
1863 

Wheat $1.16 per bu. ; corn $0.84 per bu. ; cot- 
ton $0.6721 per lb.; sugar $0.14^ per lb.; wool 
$0.75 per lb.; iron $35.24 per ton; copper 
$0.3387 per lb.; rubber $0.87^ per lb.; pork 
$18.50 per bbl.; coffee $0.2965 per lb. 
1864 

Wheat $2.01 per bu. ; corn $1.44^ per bu. ; 
cotton $1,015 per lb.; sugar $o.25y|- per lb.; 
wool $1.00 per lb.; iron $59.22 per ton; copper 
$0.47 per lb. ; rubber $0.80 per lb. ; pork $44.00 
per bbl.; coffee $0.3775 per lb. 
1865 

Wheat $2.04 per bu. ; corn $1,26^ per bu. ; 
cotton $0.8338 per lb.; sugar $0.21 5^ per lb.; 



. BUSINESS BAROMETERS 73 

wool $0.75 per lb.; iron $46.08 per ton; cop- 
per $0.3925 per lb.; rubber $1.20 per lb.; pork 
$38.00 per bbl. ; coffee $0.2537^ per lb. 
1866 

Wheat $9.20 per bu. ; corn $0.90 per bu. ; 
cotton $0432 per lb.; sugar $0.16% per lb.; 
wool $0.70 per lb. ; iron $46.84 per ton ; cop- 
per $0.3425 per lb.; rubber $1.00 per lb.; pork 
$34.00 per bbl; coffee $0.1718 per lb. 
1867 

Wheat $3.33 per bu. ; corn $1.21 per bu. ; 
cotton $0.3159 per lb.; sugar $0.15?^ per lb.; 
wool $0.55 per lb. ; iron $44.08 per ton ; copper 
$0.2537 per lb.; rubber $0.65 pier lb.; pork 
$24.50 per bbl.; coffee $0.16 per lb. 
1868 

Wheat $2.43 per bu. ; corn $1.23 per bu. ; 
cotton $0.2485 per lb.; sugar $o.i6>^ per lb.; 
wool $0.46 per lb. ; iron $39.25 per ton ; cop- 
per $0.23 per lb. ; rubber $0.67^ per lb. ; pork 
$30.00 per bbl.; coffee $0,115 per lb. 
1869 

Wheat $1.50 per bu. ; corn $1.02^ per bu. ; 
cotton $0.2901 per lb.; sugar $0.16x1- per lb.; 
wool $0.48 per lb.; iron $40.61 per ton; copper 
$0-2425 per lb. ; rubber $0.82 per lb. ; pork 
$34.00 per bbl; coffee $0.0931 per lb. 



74 BUSINESS BAR031ETERS 

1870 

Wheat $1.30 per bu. ; corn $1.02 per bu. ; 
cotton $0.2398 per lb.; sugar $0.13^ per lb.; 
wool $0.46 per lb.; iron $33.23 per ton; copper 
$0.2118 per lb. ; rubber $1.00 per lb.; pork 
$30.50 per bbl. ; coffee $0.10 per lb. 
1871 

Wheat $1.60 per bu. ; corn $0.77 per bu. ; 
cotton $0.1695 per lb.; sugar $0.13^ per lb.; 
wool $0.62 per lb.; iron $35.08 per ton; cop- 
per $0.2412 per lb.; rubber $1.00 per lb.; pork 
$23.00 per lb.; coffee $0.1375 per lb. 
1872 

Wheat $1.62 per bu. ; corn $0.70 per bu. ; 
cotton $0.2219 per lb.; sugar $0.12^ per lb.; 
wool $0.72 per lb. ; iron $48.94 per ton ; cop- 
per $0.3556 per lb. ; rubber $0.72^ per lb. ; 
pork $16.00 per bbl.; coffee $0.1631 per lb. 
1873 

Wlieat $1.76 per bu. ; corn $0.63 per bu. ; 
cotton $0.2014 per lb.; sugar $0.1 1>^ per lb.; 
wool $0.50 per lb. ; iron $42.79 per ton ; cop- 
per $0.28 per lb. ; rubber $0.74 per lb. ; pork 
$18.00 per bbl.; coffee $0.1862 per lb. 
1874 

Wlieat $1.39 per bu. ; corn $0.86 per bu. ; 
cotton 0.1795 per lb.; sugar $0.10 1\ per lb.; 



RANGE OF COMMODITY 31ARKET 75 

wool $0.53 per lb.; iron $30.19 per ton; cop- 
per $0.22 per lb; rubber $0.75 per lb.; pork 
$24.75 P^i" bbl. ; coffee $0.2625 per lb. 

1875 
Wheat $1.33 per bu. ; corn $0.84 per bu. ; 
cotton $0.1546 per lb.; sugar $0.10 1\ per lb.; 
wool $0.52 per lb. ; iron $25.53 P^^ ^o^- > cop- 
per $0.2268 per lb. ; rubber $0.58^ per lb. ; 
pork $23.50 per bbl. ; coffee $0.1806 per lb. 
1876 
W^eat $1-35 per bu. ; corn $0.62^ per bu. ; 
cotton $0.1298 per lb.; sugar $o.ioH per lb.; 
wool $0.38 per lb.; iron $22.19 P^r ^^I'^j copper 
$0.21 per lb.; rubber $0.64 per lb.; pork $22.75 
per bbl.; coffee $0,175 per lb. 
1877 
Wheat $1.63 per bu. ; corn $0.59%,; per bu.; 
cotton $0.1182 per lb.; sugar $0.11 1\ per lb.; 
wool $0.50 per lb.; iron $18.92 per ton; cop- 
per $0.19 per lb.; rubber $0.58 per lb.; pork 
$17.95 P^r bbl.; coffee $0.1943 per lb. 
1878 
W^heat $1.24 per bu. ; corn $0,533^ per bu. ; 
cotton $0.1122 per lb.; sugar $0.09^6 P^^ lb.; 
w^ool $0.36 per lb. ; iron $17.67 per ton ; cop- 
per $0.1656 per lb.; rubber $0.49 per lb.; pork 
$11.35 per bbl.; coffee $0.1385 per lb. 



76 BUSINESS BAROMETERS 

1879 

Wheat $1.24 per bu. ; corn $047 per bu. ; 
cotton $0.1084 per lb.; sugar $o.o85^ per lb.; 
wool $0.37 per lb.; iron $21.72 per ton; copper 
$0.1862 per lb.; rubber $0.51 4^er lb.; pork 
$13-75 per bbl. ; coffee $0.1387 per lb. 
1880 

Wheat $1.30 per bu. ; corn $0.55 per bu. ; 
cotton $0.1151 per lb.; sugar $0.0915 per lb.; 
wool $0.46 per lb.; iron $28.48 per ton; cop- 
per $0.2143 per lb. ; rubber $0.81 per lb. ; pork 
$19.00 per bbl; coffee $0.15 per lb. 
1881 

Wheat $1.30 per bu. ; corn $0.62 per bu. ; 
cotton $0.1203 per lb.; sugar $0.09^ per lb.; 
wool $0.42 per lb.; iron $25.17 per ton; cop- 
per $0.1818 per lb.; rubber $0.76 per lb.; pork 
$20.00 per bbl.; coffee $0.1212 per lb. 
1882 

Wheat $1.32 per bu. ; corn $0.77 per bu. ; 
cotton $0.1156 per lb.; sugar $0.09^ per lb.; 
wool $0.42 per lb.; iron $25.77 P^r ton; cop- 
per $0.1912 per lb.; rubber $0.87 per lb.; pork 
$24.71; per bbl. ; coffee $0.0975 P^r lb. 
1883 

Wheat $1.17 per bu. ; corn $0.64 per bu. ; 
cotton v$o.ii88 per lb.; sugar $o.o8M per lb.; 



RANGE OF COMMODITY MARKET 77 

wool $0.39 per lb. ; iron $22.42 per ton ; cop- 
per $0,165 per lb.; rubber $1.07 per lb.; pork 
$20.15 per bbl. ; coffee $0.0931 per lb. 
1884 

Wheat $1.00 per bu. ; corn $o.6iH per bu. ; 
cotton $0.1098 per lb.; sugar $o.o6M per lb.; 
wool $0.35 per lb.; iron $19.81 per ton; cop- 
per $0.13 per lb.; rubber $0.96 per lb.; pork 
$19.50 per bbl. ; coffee $0.1062 per lb. 
1885 

Wheat $0.94 per bu. ; corn $0.51 per bu. ; 
cotton $0-1045 per lb.; sugar $o.o6M per lb.; 
wool $0.32 per lb. ; iron $17.99 P^^ ^^^ > cop- 
per $0.1083 per lb.; rubber $0.56 per lb.; pork 
$13.25 per bbl.; coffee $0.09 per lb. 
1886 

Wheat $o.88M per bu. ; corn $0.52^ per bu. ; 
cotton $0.0928 per lb.; sugar $0.0653 P^i" ^b. ; 
wool $0.33 per lb.; iron $20.93 V^^ ton; cop- 
per $0.1385 per lb.; rubber $0.61 per lb.; pork 
$12.20 per bbl. ; coffee $0,095 P^r ^b. 
1887 

Wheat $0.88 per bu. ; corn $0.48^ per bu. ; 
cotton $0.1021 per lb.; sugar $0.0623 per lb.; 
wool $0.34 per lb. ; iron $20.93 P^^ ton ; cop- 
per $0.1385 per lb.; rubber $0.76 per lb.; pork 
$24.00 per bbl.; coffee $0.1684 per lb. 



78 BrSIXESS BAR031ETER? 

Wheat S0.94 per bu.; com S0.597I per bu.; 
cotton 80.1003 per lb.: sugar S0.0602 per lb.: 
wool S0.29 per lb.: iron S18.88 per ton.; cop- 
per So. 1677 per lb.; rubber S0.76 per lb.; pork 
S16.00 per bbl. ; coffee So. 158 1 per lb. 
1889 

Wheat $0.91 per bu. ; com S0.43M per bu. ; 
couon S0.1065 per lb.; sugar S0.0718 per lb.: 
vrool S0.35 per lb.: iron $17,76 per ton; cop- 
per So. 1349 per lb.; rubber S0.74 per lb.; pork 
i3.37-< per bbl. : coffee S0.1765 per lb. 
1890 

Wheat S0.92 per bu. ; com ^.j^S'A per bu. ; 
cotton So-1107 per lb.; sugar So. 0789 per lb.: 
vroo: So. 33 per lb. : iron S1S.41 per ton ; cop- 
per So. 1 56 per lb.; mbber S0.80 per lb.; pork 
S13.62-2 per bbl.: coffee S0.1793 per lb. 
1891 

Wheat 81.05 P^^ bu. : com So.67-2 per bu. : 
cotton S0086 per lb. : sugar S0.0627 per lb. ; wool 
S0.31 per lb.; iron S17.52 per ton; copper 
S0.1275 per lb.; rubber S0.78 per lb.; pork 
S13.00 per bbl.; coffee S0.1671 per lb. 
1892 

\Mieat S0.008 per bu. : com So. 54 per bu.; 
cotton So. 0771 per lb.; sugar Sd.0465 per lb.; 



RAXGE OF COrMODITY 3IARKET 79 

wool $0.28 per lb.; iron $15,75 P^i" ton; cop- 
per $0.1156 per lb.; rubber $0.6763 per lb.; 
pork $15.05 per bbl. ; coffee $0.1430 per lb. 

1893 

Wheat $0,739 per bu. ; corn $0,499 P^^ bit.; 
cotton $0.0856 per lb.; sugar $0.0435 P^^ l^-j 
wool $0.24 per lb.; iron $14.52 per ton; cop- 
per $0.1075 per lb.; rubber $0.7167 per lb.; 
pork $21.80 per bbl.; coffee $0.1723 per lb. 
1894 

Wheat $0,611 per bu. ; corn $0,509 per bu. ; 
cotton $0.0694 per lb.; sugar $0.0484 per lb.; 
wool $0.20 per lb.; iron $12.66 per ton; cop- 
per $0.0952 per lb.; rubber $0.6744 per lb.; 
pork $14.57^ per bbl; coft'ee $0.1654 per lb. 

1895 

Wheat $0,669 per bu. ; corn $0,477 P^^ b^-> 
cotton $0.0744 per lb.; sugar $0.0412 per lb.; 
wool $0.18 per lb.; iron $13.10 per ton; cop- 
per $0.1053 per lb.; rubber $0.7425 per lb.; 
pork $12.87^ per bbl.; coffee $0.1592 per lb. 
1896 

Wheat $0,781 per bu. ; corn $0,340 per bu. ; 
cotton $0.0793 P^^ lb.; sugar $0.0412 per lb.; 
wool $0.17 per lb.; iron $12.95 P^i* ton; cop- 
per $0.1098 per lb.; rubber $0.80 per lb.; pork 
$10.85 per bbl; coffee $0.1233 per lb. 



80 BUSINESS BAR03IETERS 

1897 

Wjheat $0,954 per bu. ; corn $0,319 per bu. ; 
cotton $0.07 per lb. ; sugar $0.0453 P^^ ^b. ; wool 
$0.21 per lb.; iron $21.10 per ton; copper 
$0.1136 per lb.; rubber $0.8454 per lb.; pork 
$9.00 per bbl. ; coffee $0.0793 P^^ lb. 
1898 

Wheat $0,952 per bu. ; corn $0,376 per bu. ; 
cotton $0.0594 per lb. ; sugar $0,045 P^i" It). ; wool 
$0.28 per lb.; iron $11.66 per ton; copper 
$0.1205 per lb.; rubber $0.9271 per lb.; pork 
$12.30 per bbl. ; coffee $0.0633 per lb. 
1899 

Wheat $0,794 per bu. ; corn $0,413 per bu. ; 
cotton $00688 per lb. ; sugar $0.0497 P^^ ^b- 5 
wool $0.29 per lb. ; iron $19.36 per ton ; copper 
$0.1776 per lb.; rubber $0.9954 per lb., pork 
$10.45 per bbl. ; coffee $0.0604 per lb. 
1900 

Wheat $0,804 per bu. ; corn $0,453 per bu. ; 
cotton $0.0925 per lb. ; sugar $0.0492 per lb. ; 
wool $o.28H per lb.; iron $19.98 per ton; cop- 
per $0.1665 per lb.; rubber $0.9817 per lb.; 
pork $16.00 per bbl. ; coffee $0.0822 per lb. 
1901 

Wheat $0,803 per bu. ; corn $0,567 per bu. ; 
cotton $0.0875 per lb.; sugar $0.0532 per lb.; 



RANGE OF COMMODITY MARKET 81 

wool $0.25 per lb.; iron $15.87 per ton; copper 
$0.1672 per lb.; rubber $0.8496 per lb.; pork 
$16.80 per bbl. ; coffee $0.0646 per lb. 
1902 

Wheat $0,836 per bu. ; corn $0,684 per bu. ; 
cotton $0.09 per lb. ; sugar $0.0505 per lb. ; wool 
$0.26 per lb.; iron $22.19 per ton; copper 
$0.1216 per lb.; rubber $0.7273 per lb.; pork 
$18.70 per ton; coffee $0.0568 per lb. 
1903 

Wheat $0,853 per bu. ; corn $0,372 per bu. ; 
cotton $0.1118 per lb.; sugar $0.0446 per lb.; 
wool $0.31^^ per lb.; iron $19.91 per ton; cop- 
per $0.1372 per lb.; rubber $0.9054 per lb.; 
pork $18.37 P^i" bbl.; coffee $0.0559 P^r lb. 
1904 

Wheat $1,107 pei" bu. ; corn $0,594 per bu. ; 
cotton $0.1175 per lb.; sugar $0.0464 per lb.; 
wool $0.32/^ per lb.; iron $15.57 per ton; cop- 
per $0.1301 per lb.; rubber $1.0875 P^i" lb.; 
pork $16.58 per bbl.; coffee $0.0782 per lb. 

1905 
Wheat $1,028 per bu. ; corn $0,593 per bu. ; 
cotton $0,098 per lb. ; sugar $0.0477 P^r lb. ; 
wool $0.36 per lb.; iron $17.88 per ton; cop- 
per $0.1589 per lb.; rubber $1,2425 per lb.; 
pork $16.50 per bbl. ; coffee $0.0832 per lb. 



82 BUSINESS BAROMETERS 

1906 

Wheat $0,865 per bu.; corn $0.56 per bu.; 
cotton $0,115 per lb.; sugar $0.0526 per lb.; 
wool $0.33 per lb.; iron $20.98 per ton; cop- 
per $0.1961 per lb.; rubber $1.2131 per lb.; 
pork $20.00 per bbl. ; coffee $0.0811 per lb. 
1907 

Wheat $0,963 per bu. ; corn $0.64 per bu. ; 
cotton $0,121 per lb.; sugar $0.0465 per lb.; 
wool $0.34 per lb. ; iron $23.89 per ton. ; cop- 
per $0.2125 per lb.; rubber $1.0633 P^^ 1^. ; 
pork $17.56 per bbl. ; coffee $0.0658 per lb. 




CHAPTER IV. 

FUNDAMENTAL STATISTICS 01^ USE IN DETERMIN- 
ING WHEN TO BUY AND SELL. 

S shown in the first chapter of this 
book, the study of Comparative 
Statistics is of little value for ascer- 
taining the best time to buy or to 
sell, and one must resort to Fun- 
damental Statistics. 

In approaching the work, although other meth- 
ods may seem sufficient for a general view of the 
conditions, the need of direct and definite results 
leads the student to seek a systematic, compre- 
hensive, and uniform practice, so that a basis of 
comparison, from period to period, may be estab- 
lished at the outset. The course usually followed 
by the leading statisticians when studying Funda- 
mental Statistics is to collect data, covering a 
long period of years, and relating to the following 
twenty-five subjects under twelve headings; 
Moreover, these twelve headings correspond al- 
most identically with the twelve subjects men- 
tioned in chapter III. 

I. Building and Real Estate 

I. BUILDING OPERATIONS (wiTH FIRE LOSSES), 



84 BUSINESS BAROMETERS 

and Real Estate Operations as Barom- 
eters of the country's property growth. 

II. Money Conditions 

2. MONEY IN CIRCULATION. 

3. comptroi.i.e:r's reports (this is the only 

one of the twenty-five subj ects for which 
no figures can be obtained monthly). 

4. LOANS OF THE NEW YORK BANKS. 

5. CASH HELD BY THE NEW YORK BANKS. 

6. DEPOSITS IN THE NEW YORK BANKS. 

7. SURPLUS RESERVES OE THE NEW YORK 

BANKS. 

III. Bank Clearings 

8. TOTAL BANK CLEARINGS OF THE UNITED 

STATES. 

9. BANK CLEARINGS OE THE UNITED STATES, 

EXCLUDING NEW YORK. 

IV. Investment Market 

10. STOCK EXCHANGE TRANSACTIONS. Tables 

on number of shares traded in, the bond 
sales, and the high and low prices of the 
ten leading stocks used by the Babson 
System as a Barometer. The latter ta- 
bles contain the high and low prices for 
each year since 1859, and the high and 
low for the current year, revised each 
month. 

11. NEW SECURITIES. Tables for the new se- 

curities listed on the New York Stock 



FUNDAMENTAL STATISTICS 85 

Exchange and figures relative to other 
issues publicly offered or authorized, but 
as yet unlisted. 

V. Business Failures 

12. BUSINESS FAILURES. Tables on number of 

failures, amount of liabilities, and ratios. 

VI. Labor Conditions 

13. LABOR STATISTICS. Tables of immigration 

figures and notes on the general situ- 
ation. 

VII. Foreign Trade 

14. IMPORTS OF MERCHANDISE INTO THE UNITED 
STATES. 

15. EXPORTS OE MERCHANDISE EROM THE 

UNITED STATES. 

16. BALANCE AND VOLUME OF TRADE. 

VIII. Gold Movements 

17. GOLD MOVEMENTS with tables on the ex- 

ports, the imports and the balance of gold 

movements. 

18. DOMESTIC AND FOREIGN MONEY RATES AND 

FOREIGN EXCHANGE, with tables on the 
rates in London. Paris, and Berlin. 

IX. Social Conditions 

10. POLITICAL FACTORS. 

X. Commodity Prices 

20. PRODUCTION OF GOLD. Tables giving the 
production in the Rand Mines which best 
show the trend in the production of the 
entire world. 



86 BUSINESS BAROMETERS 

21. PRICES OF COMMODITIES, including wheat, 

corn, cotton, iron, copper, etc. 
XL Crops and Commodity Statistics 

22. CROP CONDITIONS AND PRODUCTION OF COM- 

MODITIES, including pig iron, and copper. 
XI I. Railroad Earnings 

23. RAII^ROAD GROSS AND NET EARNINGS (ten 

railroads) with annual figures for all 
railroads relative to the new mileage 
constructed, etc. 

24. IDLE CAR FIGURES for the current year and 

the corresponding months of the pre- 
ceding two or three years. 

25. MISCELLANEOUS STATISTICS. 

Although the system should not be recom- 
mended, these figures are treated by some firms 
as follows: 

Each week the figures published on railroad, 
earnings, bank clearings, money rates, stock mar- 
ket transactions, and other items, are used for 
ascertaining present conditions ; while reports of 
crops, idle cars, gold movements, balance of trade, 
failures, etc., received from time to time, are the 
foundation for estimating the underlying con- 
ditions. These estimates for present and under- 
lying conditions are expressed in numbers as two 
barometer figures. These are used, as described 



FUXDA31ENTAL STATISTICS 87 

later, for determining the "trend" from week to 
week, and for obtaining the earliest possible in- 
formation as to any change in the mercantile, 
money, or investment market.) 

Figures on the majority of these twenty-five 
subjects can be obtained not oftener than monthly 
and therefore final totals need be studied but once 
each month. These are inserted each month in 
their respective tables, and serve as a means of 
making an intelligent estimate of what will be the 
total figures for each of the. twenty-five subjects 
at the end of the current year. 

This estimate for the year is then compared 
with the final figures for the preceding years as 
given under the first mentioned table. If there 
has been a normal growth or change, — sometimes 
a favorable showing requires an increase or some- 
times a decrease, — the figures on a given subject 
are considered as signifying satisfactory condi- 
tions ; but if a growth or change is not normal, the 
figures are considered as showing unsatisfactory 
conditions. In other words, satisfactory condi- 
tions require a normal change, and figures of 
much less than normal, or much more than nor- 
mal, are considered unsatisfactory. 

The industrial organization of the country is 
similar to the physical organization of the human 
body. The individual normally should have a 



88 BUSINESS BAROMETEKS 

certain degree of appetite which he knows is nor- 
mal and requires a normal amount of food. The 
normal appetite increases from childhood to 
youth, and from youth to maturity; but its rela- 
tion to health is the same. So long as he regular- 
ly eats a normal amount, a man continues to 
increase in strength and vitality; but if he over- 
eats, or is underfed, he ceases to gain strength, 
his efficiency is reduced, and he becomes subject 
to attacks of disease. As, therefore, the main- 
taining of good health requires a certain normal 
balance, so do the prosperous conditions of indus- 
trial life. This however, does not mean a math- 
ematical constant, as in a rapidly growing coun- 
try Hke America, the figures to be normal must 
increase in proportion as the zvealth, population 
and activity of the country increases. Great in- 
creases or great decreases are distinctly not nor- 
mal and are always significant of a marked 
change ; a change for the better, in a time of 
depression, when present conditions are very un- 
satisfactory ; or a change for the worse during 
a period of prosperity, when present conditions 
are apparently very satisfactory. 

The figures on these twenty-five subjects are 
kept permanently bound in a loose leaf ledger, 
which is usually divided into twenty-five sections. 
It often takes many years to accumulate these 



FUNDAMENTAL STATISTICS 89 

figures, as they represent slow and careful re- 
search. But they are the foundation of all inves- 
tigations and it is impossible to make practical 
use of Fundamental Statistics excepting in con- 
nection with these tables for preceding years and 
months. 

The twenty-five subjects in the list above out- 
lined are arranged in the order in which they are 
accumulated, but for weekly and monthly analy- 
ses they are usually grouped differently and clas- 
sified under the three following headings : — 

1. Tables used when studying mercantile 

Conditions. 

2. Tables used when studying monetary con- 

ditions. 

3. Tables used when studying investment 

conditions. 
In detail this classification is as follows: 
{The siih-division into present and under- 
lying conditions is not recommended. It is 
preferable to interpret each set of seven sub- 
jects simply as to present and normal condi- 
tions.) 

1. Figures Used When Studying Mercan- 
tile Conditions 

(a) For determining present mercantile con- 
ditions. 
( I ) R.ailroad Earnings. 



90 BUSINESS BARO»iETERS 

(2) Bank clearings, 
(b) For determining underlying mercantile 
conditions, 
(i) Crops and general production. 

(2) Building reports and the U. S. Steel 

''Booked Order" account. 

(3) Idle cars. 

(4) Commodity prices. 

(5) Labor conditions. 

2. Figures Used When Studying Mone- 
tary Conditions 

(a) For determining present monetary con- 

ditions, 
(i) Monetary rates and supply. 
(2) Confidence. 

(b) For determining underlying monetary 

conditions, 
(i) Surplus reserve and other items of 
the New York bank statement 
and the Comptroller's reports. 

(2) Balance of trade, imports, exports, 

and gold movements. 

(3) Foreign money rates and foreign 

exchange. 

(4) New securities issued and new cor- 

porations organized. 

(5) Money in circulation. 



FUXDA^rEXTAIi STATISTICS 9\ 

3. Figures Used When Studying Invest- 
ment Conditions 

(a) For determining present stock-market 

conditions, 
(i) Average price for leading railroad 

and industrial stocks. 
(2) Total stock exchange transactions. 

(b) For determining underlying stock mar- 

ket conditions, 
(i) Average mercantile and monetary 
conditions. 

(2) Political factors. 

(3) Great conflagrations, earthquakes, 

etc. 

(4) Failures. 

(5) Gold production. 

Investors and merchants who carefully study 
these figures will each week obtain two barometer 
figures, one for present conditions and also one 
for normal conditions, for each of the above 
three headings. In addition, they average these 
three barometer figures for present conditions 
and obtain a final summary barometer figure for 
present conditions. They also average the three 
barometer figures for normal conditions and 
obtain a final summary barometer figure for 
normal conditions. 



92 BUSINESS BAROMETERS 

Practically speaking, the barometer figures on 
present conditions are mathematically correct as 
they are obtained by comparing the actual figures 
on earnings, bank clearings, money rates, stock 
exchange prices, transactions, etc., with certain 
scales of measurement and averaging the final 
result. These figures on present conditions, there- 
fore, are not a matter of opinion and any two 
persons using the same scale would arrive at 
the same conclusion. In the case of the barometer 
figures for normal conditions, the method is 
somewhat different. Although the basic figures 
are derived by the use of a fixed scale, the result 
is often modified in accordance with other data 
at hand, and according to the opinions of the in- 
vestor or merchant making the deductions. 

To arrive at a conclusion, the summary bar- 
ometer figures, obtained each week, are compared 
with the results of previous weeks of other years. 
If, for instance, the final barometer figures for a 
long period of weeks, show a continuous but slow 
increase, the country is surely facing improved 
conditions, however poor business may appear to 
the average merchant. On the other hand if, 
during a period of great prosperity, the barometer 
figures show a gradual decrease, a reverse in 
business conditions is certain. This principle ap- 



FUNDA3IENTAL STATISTICS 93 

plies to the barometer figures both for present 
conditions and for normal conditions. 

If the barometer figure for normal condi- 
tions is much less than that for present condi- 
tions, the indication is that there is liable to be a 
change for the worse at any time ; but if the figure 
for normal conditions is considerably more 
than that for present conditions, a change for the 
better may be looked for at any time. Moreover, 
the greater the difference between the respective 
barometer figures for present conditions and 
normal conditions, the sooner the change may be 
expected. When the figures are approximately 
the same, the conditions will probably remain as 
they are and are known as ''irregular." The best 
conditions are usually signified by plus lOO or 
over, and the most unsatisfactory, by minus lOO 
or less. 

In addition to the above, business men watch 
for the monthly figures on each of the twenty-five 
or more subjects above mentioned, and as these 
figures are received each month, they have a 
clerk post them in the proper columns in the "led- 
ger." This results in giving the firm a ledger 
similar to those which contain the accounts of 
their customers. The difference is simply that 
this ledger contains the accounts known as "Fail- 
ures," "Bank Clearings," etc., instead of accounts 



94 BUSIXESS BAROMETERS 

of certain debtors such as "Jo^^ Smith" and 
*'Henry Jones." 

This method, as we have described it, may seem 
complicated at first thought, and the mass of data 
required too great to be handled easily; but such 
is not the case. Although there are a large num- 
ber of figures to study, yet the points to be re- 
membered are very simple ; viz : In determining 
present conditions, watch railroad earnings and 
bank clearings for mercantile affairs ; money rates 
and confidence for monetary affairs; and "Stock 
Market" prices and transactions for investment 
aft'airs; keeping clearly in mind that while cer- 
tain subjects, require an increase for normal con- 
ditions, others should show a decrease, and that 
abnormal figures in either direction are unsatis- 
factory. 

Firms desiring to figure underlying conditions, 
watch crop estimates, construction and build- 
ing statistics, idle cars, reports, etc. for mercan- 
tile affairs ; the New York statement, the balance 
of trade, gold movements and foreign money 
rates for monetary conditions ; and when deter- 
mining investment conditions, watch all of the 
above and especially consider political factors and 
important international events. Although theor- 
etically it is proper to consider "underlying" con- 
ditions, yet practically it is not advisable. 



funda^iextaij statistics 95 

Too much emphasis camiot be laid upon the 
danger of confusing different analyses, as often a 
figure which shows improved present conditions 
is significant of unsatisfactory future con- 
ditions. For instance, when money rates gradual- 
ly increase and surplus reserves gradually de- 
crease after a period of depression, the combin- 
ation is significant of improved present conditions. 
Also when commercial paper is discounted at 
3>^% , one may always be sure that the country 
is not prosperous; but that many factories are 
idle and many men out of work. As the mills re- 
sume operations and as business becomes more 
active, money rates increase and surplus reserves 
decrease. This is all shown by higher barometer 
figures for present monetary conditions. 

On the other hand, as money rates increase 
and the surplus reserves decrease, the change is 
significant of unsatisfactory future conditions. 
In other words, when money rates are helozv 
normal it shows business is dull, but will be 
better; and when money rates are above norm.al 
it shows that business is good, but may soon 
be worse. 

Of course if this data were obtained by each in- 
vestor, merchant or banking house independently, 
it would require a force of clerks to collect, ana- 
lyze and sort the mass of figures ; but as the data 



% BUSINESS BAROMETERS 

may now be obtained from a central agency, all 
of the drudgery is eliminated. The investor or 
merchant may simply note the new barometer 
figures as they are made up each w^eek and insert 
in the perm.anent ledger the final monthly figures 
as they are received each month. 

So long as the barometer figures show no 
decided change, the merchant or investor may 
give no attention to the monthly figures other 
than to see that they are entered in the ledger. 
On the other hand, if at any time a comparison 
of the barometer figures shows that a distinct 
change in business conditions is imminent, the 
merchant may refer to the yearly and 
monthly tables as appearing in his ledger and de- 
termine for himself the exact nature and amount 
of the change. By referring to the monthly fig- 
ures published for the current year, he may 
readily compare them with the figures for the 
same months of the past few years and form an 
estimate of what the total annual figures for the 
current year will be. After making this estimate 
for the total current year, it may be readily com- 
pared with the final annual figures for preceding 
years, which comparison will clearly indicate the 
trend of business conditions. 

In addition to carefully studying all subjects 
independently and separately, he is very careful 



FUNDAMENTAL STATISTICS 97 

to consider each subject under its proper heading. 
That is, when studying present conditions he first 
gives his entire attention to present mercantile 
conditions, studying simply subjects relating 
thereto; secondly, gives his attention to present 
monetary conditions, studying only subjects re- 
lating thereto ; and thirdly gives his attention to 
inrestment conditions, with the same care. After 
referring to the tables in this way and deducing 
three separate conclusions, he takes an average 
of these conclusions, thus forming his final sum- 
mary on present conditions. In the same way, 
when studying normal conditions, he first 
studies the subjects in forecasting mercantile af- 
fairs and forms his conclusions therefrom ; sec- 
ondly, the subjects used for monetary affairs ; and 
thirdly, the subjects connected with investment 
affairs. To make independently a satisfactory 
examination in this way requires only a few 
hours. Usually the investor or merchant is satis- 
fied to depend upon the barometer figures fur- 
nished by the central agency, and does not make 
a personal examination more than once or twice 
a year, excepting in times of panic. This is es- 
pecially true if the weekly barometer -figures are 
supplemented by charts — revised monthly — for 
each of the tzvelve main subjects or headings 
previously mentioned. With these charts shozv- 



98 BUSINESS BAROMETERS 

irig the relation between the actual and the nor- 
mal, all thoughts of "underlying" conditions may 
be ignored, thus greatly simplifying the zvork. 

But whenever the time or money expended, 
the merchant, investor, or banker never regrets 
these investigations, as they give him a clear idea, 
not only of present conditions but also of the 
normal conditions and consequently of what 
he may expect in the future. If, during a period 
of depression, uncertainty, and discouragement, 
the barometer figures and the charts show dis- 
tinctly that the country is about to enter a period 
of prosperity, investors buy stocks, merchants 
buy goods, and the banker extends loans. The 
result is that when prosperity returns the inves- 
tors and merchants find that they have purchased 
very much below the prevailing prices and are 
liable to obtain many times the profit that they 
otherwise would. 

During a period of great prosperity and extrav- 
agance, when everybody is buying goods or secur- 
ities and there is a general increase of indebted- 
ness, if these barometer figures and- charts show 
a change for the v/orse, the investors sell their 
securities for cash, the merchants reduce their 
stock and outstanding credits, and the bankers 
reduce loans or place a large part of them ''on 
call." These statistics therefore, not only serve 



FUNDAMENTAL STATISTICS 99 

as an insurance against loss, but enable these men 
to be prepared to take advantage of the very low 
prices which are sure to recur in the course of 
a year or two. 

The Chart System is possible, as the figures for 
underlying conditions bear a constant ratio to the 
difference between the figures for present condi- 
tions and normal conditions. By obtaining prop- 
er figures under each of the twelve headings for 
normal conditions and comparing therewith the 
figures for present conditions the result is self 
evident. The reason for this may appear clearer 
by remembering that all underlying conditions 
may be classified as "unsatisfactory,"' "normal or 
satisfactory/' or "ultra conservative.'' 

Unsatisfactory underlying conditions exist 
when the figures are dangerously abnormal or 
when the pendulum has swung too far towards 
the dangerous side and must, by force of gravity, 
soon fall. Very satisfactory or ultra conservative 
underlying conditions exist when the figures are 
abnormally conservative or when the pendulum 
has swung too far on the conservative side and 
must, by force of gravity, soon fall. Satisfactory 
or normal conditions exist when the figures are 
normal and the pendulum is swinging not too far 
in either direction from the center 




CHAPTER V. 

EVENTS AND CONDITIONS SINCE i860 WITH EACH YEAR 

TREATED INDEPENDENTLY 

i860 

|ONDITIONS were very unsatisfac- 
tory; Lincoln was elected in Nov- 
ember and the Southern States im- 
mediately thereafter gave notice of 
their secession. This caused a financial crisis, and, 
for the first time in the history of the country, clear- 
ing house certificates were issued. The failures 
for the year w^ere 3676; pig iron, of which 821,- 
223 tons were produced, sold at an average 
price of $22.70 per ton; 1837 additional miles 
of railroad were constructed; 150,237 immi- 
grants entered the country; the clearings 
amounted to over $7,230,000,000 while exports 
and imports together amounted to over $687,- 
000,000. These apparently normal figures, how- 
ever, were due to presumably satisfactory con- 
ditions during the first eight or nine months of 
the year. The "drop" came at the time of the 
election and of high money rates in November. 
1861 
Conditions at the beginning of the year were 
very unsatiij^aetory and continued so during the 



E\^T1NTS SINCE 1860 101 

first six months. There were 6,993 faikires; 
the production of pig iron decreased to 653,164 
tons and the price decreased to $20.26 per ton. 
Only 660 miles of new road were constructed 
and less than 90,000 immigrants came to the 
country; the clearings fell off to less than 
$6,000,000, and the foreign trade to about $500,- 
000,000. But the people soon recovered cour- 
age, and the last portion of the year saw a change 
for the better. In March, the Morrill 
tariff law was passed, which gave a special im- 
petus to mercantile and manufacturing business, 
and by the close of the year a period of improved 
conditions was well under way with easier mon- 
ey rates. 

1862 
This year the failures fell to 1652; the 
pig iron produced amounted to over 700,000 tons 
and the price to about $24 per ton. There were 
834 new miles of railroad constructed and the 
immigration was practically the same as the 
preceding year; the clearings increased to over 
$6,870,000,000, but the volume of foreign trade 
decreased to about $380,000,000, thus showing 
that the period of improvement had gained 
strength. 



102 BUSINESS BAROMETERS 

1863 

The failures declined to 495 and the iron pro- 
duction increased to 846,000 tons with an in- 
crease in price to over $35 a ton. There were 
1050 additional miles of railroad constructed, 
immigration increased to over 174,000, and the 
clearings increased to nearly $15,000,000,000. 
Moreover, foreign trade increased to over $447.- 
aoo,ooo. 

This year the first horse car line v^-as con- 
structed in New York City, and the Erie railroad 
began to pay dividends. ^Moreover, Congress 
aided the movement toward prosperity by pass- 
mg certain laws for the inflation of the cur- 
disastrous to the country, temporarily hastened 
the period of prosperity. 
1864 

This period of prosperity was at its full height 
at the beginning of 1864. The failures had in- 
creased slightly numbering 520; the iron pro- 
duction amounted to over 1,000,000 tons with 
a phenomenal high price of $59 per ton. Only 
738 miles of new road were constructed, but 
nearly 200,000 immigrants entered the country. 
The bank clearings increased to over $24,000,- 
000,000, nearly double the total for the previous 
year and four times the amount for 1862. For- 
eign trade increased to over $475,000,000, but 
money rates were high. 



EVENTS SINCE 1860 lOS 

This year in connection with the stock of 
the Harlem River R. R., a corner took place 
which, together with the figures above men- 
tioned, showed clearly that conditions were 
unsatisfactory and that a change for the 
worse might be expected at any time. The men 
who saw this change sold their stocks either late 
in 1864 or at the beginning of the next year. 
1865 

The failures again increased to 530 and the 
pig iron production decreased sharply to about 
830,000 tons, while the price fell to $46 a 
ton. 1 177 miles of new road were constructed 
and over 247,000 immigrants arrived. The bank 
clearings showed very little increase, amounting 
to only $26,000,000,000; and foreign trade fell 
oif to about $400,000,000. Money rates were 
still high. 

Had it not been for Lee's surrender, these 
figures v/ould have been much more unsatisfac- 
tory, but the fact that the war had closed, caused 
sufficient rejoicing to counteract many other 
evils. The shooting of Lincoln, however, again 
upset matters and owning to the unsatisfactory 
conditions of the tw^o previous years, stocks 
which sold at a high average price of 
$158 in the early part of the year fell to an 
average of $125 before the year ended. 



104 BUSINESS BAROMETERS 

1866 

This decline of stocks was continued in 
1866, when the average fell to $99, a de- 
cline which was anticipated by those who had 
been watching the trend of figures closely. This 
year the first official crop reports were published 
by the national government. 

Corn and wheat produced this year amounted 
to over 1,000,000,000 bushels. The failures in- 
creased 300% numbering over 1500, showing 
that the severe period of decline, which had be- 
gun the previous year, had become well-devel- 
oped. In fact this was generally considered a 
year of distinct depression and gloom. Not- 
withstanidng the very great number of failures, 
iron production increased to over 1,200,000 tons 
and the selling price averaged $46 per ton. 1716 
miles of new railroad were constructed, the 
clearings showed a slight increase amounting 
to over $28,000,000,000 foreign trade increased 
to over $780,000,000, thus showing that under- 
lying conditions had begun to im.prove, even 
although surface conditions and the stock mar- 
ket showed no improvement. After the v/ar 
closed, banking conditions became more settled 
and money became easier. 



EVENTS SINCE 1860 105 

1867 

Although this year the two major crops were 
sHghtly less, declining to 980,761,400 bushels, 
and failures had increased to 2780, yet there was 
also a slight increase in the iron production. 
This production showed an increase of 100,000 
tons, with only a small decrease in the price 
per ton. Moreover, 2249 miles of new railroad 
were constructed and the bank clearings held 
their own with the value of foreign trade only 
slightly lower. Stocks were still very low, the 
average being 98 compared with a high point 
of over 158 two years earlier. Surface condi- 
tions were still very bad, yet it was plainly to 
be seen that they were rapidly becoming more 
normal and that a rise in stocks was imminent, 
especially as money rates had declined. 
1868. 

The expected advance came the follow- 
ing year, when the average price increased 
from 98 in 1867 to 147 in 1868. The crops of 
corn and wheat were over 1,130,000,000 bushels; 
the failures decreased from 1-33% to .94% com- 
pared with the number of firms in business ; the 
iron production increased to over i ,400,000 tons ; 
2979 miles of railroad were constructed ; bank 
clearings again showed no decline, but held their 
own and there was but a slight reduction in 
foreign trade. 



106 BUSINESS BAROMETERS 

The increase in the price of stocks, how- 
ever, was more or less artificial, as this was 
the year of the great contest between the Erie 
Railroad, represented by Drew and Fiske, and 
the New York Central, represented by Commo- 
dore Vanderbilt, the former winning by having 
the Erie put out a convertible bond issue and 
then immediately converting the bonds into cash. 
Owning to this and other unfortunate incidents, 
the student saw clearly that, although business 
was improving, the underlying conditions in the 
stock market were unsatisfactory; that is, the 
great rise was not wholly founded on improved 
underlying conditions. ^Moreover, the money 
situation w^as not truly satisfactory. 

1869 
That this analysis of the situation was 
decidedly correct was proved by the history of 
1869, for this year witnessed the famous "Black 
Friday" panic when the gold exchange suspend- 
ed and many large stock exchange firms failed. 
This is one of the incidents where special events 
upset the general trend of conditions. Had it 
not been for the unfortunate operations of cer- 
tain speculators, the period of prosperity which 
was just beginning, would have had a much 
longer duration. Crops of 1869 exceeded those 



E\"ENTS SIXCE 1S60 107 

of any previous year; the failures decreased to 
.79%; iron production increased to 1,700,000 tons 
at a price of over $40 a ton. Over 4615 miles 
of new railroad were constructed and over 
350,000 immigrants came to the country. The 
bank clearings showed a phenomenal increase, 
amounting to over $37,000,000,000, and the for- 
eign trade exceeded $700,000,000. As was the 
case, however, with the Harlem corner in 1864, 
the "Black Friday" panic of this year seemed 
to create a w^ound that would not heal, so that 
although business continued to increase and sur- 
face conditions appeared to be more favorable, 
underlying conditions grew more and more un- 
satisfactory every day and money rates continued 
high. The leading bankers and merchants who 
w^ere studying these underlying conditions and 
watching the relation between actual and normal 
figures, disposed of their securities and reduced 
their merchandise. 

1870 
Had it not been for the fine crops of 1870 — 
which showed figures largely in excess of any 
previous year — there would have been a more 
rapid decline in business conditions. As it was, 
however, the failures increased to .83%, iron 
production dropped to 1,565,179 tons and the 



108 BUSINESS BAROMETERS 

price to $33.23 a ton, the lowest for eight years. 
However, 6,078 miles of new railroad were con- 
structed; immigrants continued to arrive in 
great numbers, the total being 387,000, while 
foreign trade reached a volume of $828,ooo,oao. 
Bank clearings, on the other hand, showed a 
considerable falling off, although the year as a 
whole was looked upon by business men as pros- 
perous. Many of those who were not acquaint- 
ed with the true condition of affairs increased 
their stocks of goods and extended their loans. 
As the stock market was steady, in- 
siders acquainted with the conditions had no 
trouble in disposing of the small number of 
shares which they had not sold during the pre- 
ceding year. This also may have been due to the 
fact that money was much easier during this 
year. 

1871 
The crops this year amounted to only 1,220,- 
000,000 bushels; the failures to 2915 and iron 
production to 1,700,000 tons at a price of $35 
per ton. There were 7379 miles of new railroad 
constructed and foreign trade increased to over 
$963,000,000. There was a falling off, however, 
in immigration and the increase in bank clear- 
ings was only normal. This too was the year 



EVENTS SINCE 1860 [09 

of the great Chicago fire which caused money 
rates to again increase,brought to an abrupt end 
the period of prosperity and inaugurated a slow 
but gradual period of decline in business. 
1872 
This year the country had better crops which 
amounted to 1,342,000,000 bushels or about the 
same as in 1870. The failures, however, in- 
creased to .'^"^'^'/o and iron production took a 
jump to 2,500,000 tons with an increase in price 
to $49 a ton. This great increase of iron pro- 
duction was probably due to the perfection of 
commercial rnethods of making Bessemer and 
open hearth steel, greatly increasing the demand 
for all grades of pig-iron, but especially the 
lower grades. Construction, which is always 
clearly indicated by the number of additional 
miles of railroad reported — which this year 
amounted to only 5878 — was very much less 
than usual. Immigration, however, increased to 
over 400,000 new arrivals and t he bank 
clearings to over $33,000,000,000. Foreign trade 
showed a small increase and money rates were 
again erratic. 

1873 

Still conditions would probably have improved 
this year had it not been for the big Boston fire. 



110 BUSINESS BAROBIETERS 

which occurred November ii, 1872, and caused 
money rates to still further advance and which 
was the last straw to break the camel's back. 
The Pacific Railroads, opened in the year 1869, 
were largely owned in New England and the 
promoters of both State Street and Wall Street 
had been borrowing money heavily of the in- 
surance companies. These loans the insurance 
companies were now obliged to call. Moreover, 
the preceding year was the culmination of the 
Erie tragedy when James Fiske was shot and 
Erie stocks were struck from the New York 
Stock Exchange, Money had been very high 
in 1872 and men of affairs clearly saw at the 
beginning of 1873, that it would be impossible 
to continue business under existing conditions 
and that a house cleaning would be necessary. 
Consequently, when crop reports continued to 
point to small harvests, which later turned out 
to be about 100,000,000 bushels less than the 
preceding year, and when the number of fail- 
ures showed a distinct increase, things were 
allowed to seek their own level. That is, the large 
bankers and merchants withdrew their support 
and business began to decrease immediately. The 
production of iron kept up to the figures of the 
preceding year, but the price dropped to $42 a 



EVENTS SINCE 1860 111 

ton. Moreover, railroad construction decreased 
to about 4,000 miles, although the figures for 
immigration, bank clearings and foreign trade, 
still held firm. 

Conditions at this time are interesting to study 
as they show clearly the three steps in the pro- 
gress of a decline and the precipitation of a cri- 
sis : Urst, the large bankers and merchants sell 
their securities and reduce their merchandise, 
while the public is very optimistic; second, after 
some special event has taken place, in this case 
the Boston fire, which convinces these bankers 
and great merchants that the time has come 
for a house cleaning, — they withdraw their sup- 
port, although the people are still bullish and 
the ordinary store-keeper is borrowing money to 
buy goods ; and third comes the panic itself, — 
v.-hich in the case of the great panic of 1873 
caused the failure of J. Cook & Co. and many 
other firms. This panic made imperative the clos- 
ing of the New York Stock Exchange from Sep- 
tember 18 to the 30th. This third step is the be- 
ginning of the decline in the eyes of the ordinary 
merchant, manufacturer and laborer. And in real- 
ity, until this third phase comes,there is no decline 
in surface conditions, although underlying condi- 
tions have been unsatisfactory for a year or more, 



112 BUSINESS BAROMETERS 

during which time bankers and merchants who 
study underlying conditions, had been preparing 
for the depression. 

1874 
This was another year of poor crops, the total 
production of iron and wheat decreasing to 
1,158,000,000 bushels. Failures increased to 
.97% ; iron production fell off and the price de- 
creased from $42 to $30 a ton. Railroad construc- 
tion decreased to only 21 17 miles; immigration 
fell off to nearly 150,000 and bank clearings fell 
from $35,000,000,000 in 1873 ^o $22,000,000,000 
in 1874, accompanied with a decrease in foreign 
trade. Thus the period of decline was changing 
to a period of depression, augmented by grang- 
er laws which were being passed by the railroads 
and the usual unsatisfactory money conditions. 

1875 
This was a year of good crops of wheat and 
corn, together amounting to over 1,613,000,000 
bushels. Mercantile failures, however, showed 
a great increase, viz: to i.2i7o; iron production 
dropped to 2,000,000 tons and the price to $25 
a ton. Moreover, only 171 1 miles of railroad 
were constructed, the smallest number for ten 
years, and immigrants decreased nearly another 
hundred thousand. Railroad earnings showed 



EVENTS SINCE 1860 113 

a tremendous falling off, and both the Erie and 
the Wabash defaulted interest on their bonds. 
Money continued high and confidence was great- 
ly upset. Bank clearings, on the other hand, 
showed a slight increase and foreign trade a 
slight decrease, thus showing that the period of 
depression had set in. The business depression, 
however, relieved the money market and rates 
gradually decreased. 

1876 
Commercial failures increased to 1.33% of the 
firms in business ; iron production decreased to 
1,868,000 tons and the price to $22 a ton. New 
mileage increased somewhat, but immigration 
fell ofif further to 169,000 ; bank clearings to 
about $21,000,000,000 and the foreign trade 
to $1,000,000,000. These figures, it will be seen, 
reached the most unsatisfactory point for sev- 
eral years and a study shows that they were 
considerably below normal and that the liquida- 
tion had been very thorough. Money had be- 
come easier and stocks were very low owing to 
a general rate-war between the trunk lines. In 
fact, the Pacific of Missouri was foreclosed this 
year and the public became very much discour- 
aged. All who had been connected with stocks 
had lost their money, prominent bankers and 



114 BUSINESS BAROMETERS 

merchants had failed, railroads were carrying 
traffic at a loss, mills and factories were idle, and 
the ordinary business man was thoroughly dis- 
couraged. Money rates however, were less than 
at any time since i860. 

These facts showed that the pendulum had 
swung too far the other way, but knowing that 
business conditions are like the pendulum which 
after wide swings in either direction, tends to 
resume a noraial position in response to the laws 
of gravity, investors and merchants who were 
studying the conditions and comparing figures 
saw clearly that this was the year in which to 
buy stocks, make plans for further extensions, 
and prepare for the period of improved condi- 
tions which was bound to come. In fact, the 
stocks which these investors sold at an average 
of $160 a share in 1869 many now purchased, 
at an average of $62 a share, while others who 
v^'aited until the beginning of the following year 
purchased at an average price of $42. 

1877 
As is usual, the business of a merchant, man- 
ufacturer and store-keeper continues poor a year 
after conditions really begin to improve and the 
stock market begins to advance. Therefore, 
although students of the situation saw a change 



EVENTS SIXCE 1860 115 

for the better the preceding year, it was not 
until this year that any change was apparent in 
mercantile conditions, and then it was but slight. 
This year brought good crops which amounted 
to over 1,700,000,000 bushels; failures, for the 
reasons given above, increased compared with 
the number of firms in business, to 1.36%; iron 
production increased to over 2,000 tons (al 
though the price dropped further to $18.92 per 
ton) ; immigration figures continued to decline, 
but the rate of decline gradually diminished. 
Bank clearings, however showed a slight in- 
crease to $23,000,000,000, foreign trade to 
$1,050,000,000 and money rates continued low. 
The country was in extreme depression at 
the beginning of the year, yet with the good 
crops, railroad earnings and confidence im- 
proved. Moreover, money rates gradually de- 
creased so that Christmas 1877, was a time of 
thanksgiving for many who had escaped being 
crushed during the preceding five years. 

1878 

This year crops still further increased by an- 
other 100,000,000 bushels. Failures also in- 
creased in number, showing that the effect of 
the depression on smaller firms was not yet 
over, and also that the statistics of failures are 



116 ErSINESS BAKOMETKRS 

about the last to show an improvement. Yet 
iron production was increased to a total of 2,301,- 
215 tons, while the price declined only about 
$1 a ton; railroad construction showed no fur- 
ther decline, but advanced to 2665 miles and 
there was but a slight decline in immigration. 
Bank clearings practically held their own and 
foreign trade showed a distinct increase. As 
such an increase prevented gold exportations 
and further strengthened the money conditions 
at home, the year was considered by all as one 
of distinct improvement. 

1879 

Again, the country was blessed with good 
crops which amounted to nearly 200,000,000,000 
bushels, and failures decreased phenomenally to 
less than 1%, the lowest for five years, ^slore- 
over, iron production increased to over 2,700,- 
000 tons and the price to over $21 per ton. Rail- 
road construction nearly doubled, amounting to 
4809 miles and immigration showed a distinct 
increase for the first time for six years ; bank 
clearings increased to over $25,000,000,000 and 
foreign trade to $1,156,000,000. 

In fact the entire year witnessed an improve- 
ment so marked that at the end of the twelve 
months, mills were in full operation, all labor 



EVENTS SINCE 1860 117 

employed, and the entire country in a very 
prosperous condition. Money rates strengthened 
somewhat, but not severely. 
1880. 

This year marked the beginning of another 
period of distinct prosperity. The crops amount- 
ed to over 2,215,000,000 bushels. The failures 
decreased to .63%, — with one exception the low- 
est point on record, — iron production increased 
about 50% to 3,800,000 tons with an increase in 
price to $28 a ton. The new mileage constructed 
am.ounted to 671 1 miles and immigration in- 
creased from 177,000 in 1879 to 257,000 in 1880. 
The most noticeable change in all the statistics 
was in bank clearings, which increased to 
$37,000,000,000 and foreign trade to $1,500,000,- 
000. 

Stocks were very active, money normal, con- 
fidence reigned throughout the country, con- 
solidations were in progress, new industries were 
started, new railroads were projected and every- 
one was elated over the fact that the country 
was once m.ore prosperous. Moreover, Garfield 
the candidate for the Republican party, ahvays 
representative of business interests, was elected 
President in November. Money was constantly 
in more demand and the rates were gradually 
increasing. 



118 BUSINESS BARO^rETERS 

1881 

Although the general public considered this 
year one of great prosperity, there were certain 
events which caused the barometers for underly- 
ing conditions to begin to decline, and before 
the year 1881 closed, the underlying conditions 
were very unsatisfactory. The crop outlook 
was poor and the year ended with a crop failure, 
the wheat and corn production decreasing to 
about 1,578,000,000 bushels. The percentage of 
failures began to increase, and although the 
price of iron decreased, the production increased 
above the normal. Moreover, 9846 miles of rail- 
road were constructed, and amount four times 
greater than that four years before ; immigration 
began to increase in new proportions and bank 
clearings increased to the abnormally large sum 
of $48,000,000,000. Foreign trade showed no 
appreciable increase. 

Money conditions were not satisfactory, 
tremendous stock issues were being float- 
ed, and large stock dividends were being de- 
clared. To the outsider everything appeared to 
be very prosperous, yet the careful student saw 
plainly, that true conditions were not what they 
should be and needed only some sudden dis- 



EVENTS SINCE 1860 119 

tnrbing event, to bring about disaster, — 
such an event as the Harlem corner in 1864 and 
the Boston fire in 1873. 

This sudden event turned out to be the shoot- 
ing of President Garfield on July 2, 1881, after 
which event, the bankers and merchants who 
kept careful watch of conditions decided 
to sell. Therefore, in 188 1 they sold, 
at an average of $137 a share, securities which 
some of them had purchased at an average of 
$62 in 1876 and others at an average of $48 a 
share in 1877. 

1882 

Fortunately however for those who had 
not already liquidated, this year was another 
year of splendid crops, the country producing 
over 2,121,000,000 bushels of wheat and corn. 
Failures increased and iron production expand- 
ed far above a healthy amount, while railroad 
new construction reached the high figure of 
11,599 miles, the greatest new mileage for any 
year in the history of the country. A very large 
number of immigrants arrived, 788,000, and 
bank clearings continued to hold up to $46,000,- 
000,000 which was far in excess of normal con- 
ditions. 



120 BUSINESS BAROMETERS 

Therefore, although students of the business 
conditions clearly understood during the pre- 
ceding year that trouble would soon come, the 
public apparently was absolutely unaware of it 
and as in 1870, continued to buy goods, increase 
their loans, and to extend their credit. In fact 
the average merchant and speculator seemed per- 
versely to do everything possible to make the 
break greater when the large bankers and mer- 
chants should withdraw support for, although 
the decline had set in, it was not perceived by 
the general public. As mentioned in the ac- 
count of the year 1873, there are three steps in 
every decline; and the second, that in which the 
leaders withdraw their support, had not come, 
for this was the year in which Jay Gould made 
his famous exhibit of securities. As will be 
seen by reTerring to the newspapers of that day, 
it was clearly understood by men of affairs that 
a distinct decline had begun and Gould probably 
knew this as well, if not better, than any other 
man. Therefore, although he was preaching 
that true conditions were perfectly sound and 
that still greater prosperity was ahead, he him- 
self was doubtless unloading and liquidating 
with all possible speed in preparation for the 
withdrawal of his support later on. Moreover, 



El^ENTS SINCE 1860 121 

the banks were aiding their directors by keeping 
down money rates although the demand for mon- 
ey was very great. 

1883 

The crops for this year were not up to the 
preceding year, amounting to only 1,972,000,000 
bushels. Moreover failures continued to in- 
crease, reaching a percentage of 1.06%; iron pro- 
duction fell off and the price dropped to $22.42 
a ton; railroad construction declined about 40%, 
and bank clearings fell off to $40,000,000,000 
for New York City. Heretofore these were the 
only clearings available. Beginning this year, 
clearings were published for the entire country 
and now amounted to $51,699,823,752. As this 
new figure is more valuable for forecasting con- 
ditions, it will be the one to which we shall re- 
fer henceforth. Fortunately for the country and 
for those who had not liquidated, foreign trade 
still remained strong, the volume for the year 
being $1,500,000,000. 

The stock market also held up remarkably 
well although high prices were maintained only 
through manipulation and in order to allow the 
insiders the opportunity to liquidate. In other 
words, although stocks continually declined, be- 
ginning in 1 88 1, when they had reached a high 



122 BUSINESS BAROMETERS 

point of $137, they reached another high point 
of $134 in 1882 and $121 in 1883. All who 
v/ere thoroughly acquainted with the situation 
knew that these prices were kept up simply to 
allow the insiders to liquidate and that as soon 
as they had liquidated and withdrawn their sup- 
port, the decline would be much more rapid. In 
the same way money rates were not allowed to 
seek their true high level- 

1884 

When this support was actually w^ithdrawn 
in 1884, money rates immediately advanced and 
the prices of stocks immediately dropped to the 
proper level under such unsatisfactory conditions, 
— that is to about $80 a share. This drop was 
simultaneous with the great Ward and Grant 
failure on ]\Iay 6, 1884, together with the fail- 
ure of Henry Villard and James R. Keene of 
the same year. Now the bankers had sold their 
securities, loans were immediately called, rates 
marked up, and everything possible' done to 
make other people liquidate. Receivers were 
appointed for many of the railroads and the 
third step mentioned in our description of the 
year 1873 was now completed. Crop conditions 
were somewhat against these insiders, as this 
was another year of fine crops, corn and wheat 



EVENTS SINCE 18(80 123 

amounting to over 2,300,000,000 bushels; but 
the faihires increased again to 1.21%, iron pro- 
duction fell off to about 4,000,000 tons and the 
price to less than $20 per ton. New mileage 
amounting to over 11,000 miles in 1882, de- 
creased to less than 4,000 miles in 1884. Not 
only was this cessation in construction necessary 
owing to the stringency in the money market. 
but it was one of the means used by the large 
bankers for withdrawing their support. Immi- 
gration showed a large decrease and clearings 
dropped to $44,165,126,355, accompanied by a 
decline of about $150,000,000, in foreign trade. 

If it had not been for the good crop reports 
during this year, probably stocks would have 
declined very much further, but under the cir- 
cumstances they dropped only to an average 
of $80. In fact, the election of Grover Cleveland 
in November did not seem to break the market 
very severely and many bankers and investors 
decided that this was a time to again purchase, 
being able to obtain at an average of $80 a share 
what they sold at an average of $137 in 1881. 
As it happened, however, the following year 
was still to be one of depression and those who 
did not purchase in 1884 still had an opportun- 
ity to obtain these stocks below $90 during the 
following year, 1885. 



124 BUSINESS BAROJIETERS 

1885 

This was a year of distinct depression, with 
the customary accompaniments ; cheap money 
and general activity. The crops were fairly 
good, wheat and corn amounting to 2,293,000,- 
000 bushels. Failures showed a percentage of 
1.16% and only about 4,000,000 tons of iron 
were produced at a price of $17.99 ^ ton. Only 
3 131 miles of new railroad were constructed 
this year and the immigration amounted to less 
than 400,000 persons. The total bank clearings 
amounted to only about $47,439,303,599 and the 
foreign trade to $1,320,000,000. The falling off 
in both immigration and bank clearings was 
tremendous and these, together with figures for 
new railroad construction show conclusively the 
state of trade during this year. Moreover, there 
were no prospects of improved conditions, ex- 
cept that the liquidation had been thorough. The 
ten stocks already mentioned in this book, which 
sold at an average of $80 in 1884, sold at an 
average of $83 at one time during this year, 
1885. As in previous instances, therefore, there 
was a set-back in prices after the first advance, 
showing 'that investors have about one year 
in which to purchase securities. Although pur- 
chases should be made before there is an im- 



EVENTS SINCE 1860 125 

provement in surface conditions, they need not 
be purchased at the time of the first break, and 
no great haste is necessary. 
1886. 
The crops this year showed a slight falling 
off, but this was due more to a smaller acreage 
than to smaller crops. The percentage of fail- 
ures was reduced to 1.01% and the iron pro- 
duction increased to 5,683,000 tons with an in- 
crease in price to $18.71. Immigration still further 
decreased to 334,000, but the new mileage con- 
structed amounted to 8128 miles and the clear- 
ings increased to $49,247,681,400 while the vol- 
ume of trade practically held its own. These 
figures show that a period of improvement had 
commenced, and although many small merchants 
were only beginning to feel the effects of the 
great depression, true conditions were distinctly 
more than normal and the pendulum was swing- 
ing too far the other way. In view of this, 
stocks began to rally and plans for extensions 
and large undertakings were again discussed. 
]\Ioreover, the defeat of the various bills, which 
were introduced into Congress for the reduc- 
tion of the tariff caused a special increase of 
confidence among manufacturers, wholesalers 
and bankers. Money rates also remained nor- 
mal which greatly encouraged new enterprises. 



126 BUSINESS BAR03IETERS 

1887 

Although the total crops for this year were 
slightly below that of previous years, other fac- 
tors were distinctly favorable, and in the early 
part of the year there was a great advance in 
the stock market. — an advance altogether too 
great for a year preceding a presidential elec- 
tion. As above stated, however, underlying con- 
ditions rapidly improved; failures decreased to 
.90% ; iron production increased to over 6,400,- 
000 and the price to over $20 a ton. The num- 
ber of miles of railroad constructed increased 
to 12,983 miles : immigration showed an increase 
■of about 150,000 which was the greatest for a 
number of years. Clearings again showed an 
increase to a total of nearly $51,091,236,324 and 
foreign trade increased to over Si, 400,000,000. 
As the two preceding years were years of im- 
provement, this year ushered in the year of 
prosperity, during which, had it not been for the 
fact of the presidential election coming the fol- 
lowing year, stock market prices would have 
doubtless greatly increased. This is especially 
true since money rates continued fairly low 
throughout the year. 

Owing to the fact that a presidential election 
is usually accompanied by a decrease in trade, 



EVENTS SINCE 1860 127 

as shown by lower figures for bank clearings, 
etc., stock market operators believed that there 
must be of necessity, a distinct drop before the 
election. Consequently they turned to the "bear" 
side for a few^ months. The result of this move- 
ment was that if one had sold during the early 
part of 1887 he could have again purchased the 
same securities for about 25 points less in 1888. 
It is important to notice at this point that 
although prosperity may begin just preceding 
an election, if so, it always suffers a temporary 
set-back before reaching its zenith. When the 
election comes after two or three years of pros- 
perity, it is generally a sign of a period of de- 
cline. 



i; 

As true conditions were on the conservative 
side of normal, and as the period of prosperity 
had not been of long duration, having only just 
begun, this shock was bound to be only tempor- 
ary, especially as in this year of 1888 the crop 
outlook was good, wheat and corn, amounting 
to 2,400,000,000 bushels. Being a presidential 
year, the failures increased 1% and there was 
no marked increase in the iron production, — in 
fact, the price fell off about $2 a ton. Only 
7028 miles of railroad was constructed and the 
bank clearings declined to about $49,484,584,175. 



128 BUSINESS BAROMETERS 

Immigration, however, again increased to over 
546,000, the volume of trade to $1,419,000,000, 
while money rates continued fairly normal. 

As the Democrats were defeated and General 
Harrison, of the Republican party elected, there 
was immediate improvement in all business 
conditions, including a rebound in stock market 
prices to the former high level of over a year 
before. 

1889 
This was another year of prosperity, with the 
greatest crops in the history of the nation, up 
to this time, amounting to over 2,500,000,000 
bushels in corn and wheat. The year showed 
no appreciable increase in failures, iron pro- 
duction increased to 7,600,000 tons with but 
a slight decline in price. The decrease for new 
railroad mileage constructed fell to 5,695 miles, 
but as the country was now^ well served with 
railroad mileage, average figures meant even 
m.ore than very high figures a few years previous 
to this. The decrease in immigration was 
largely due, to this decrease in railroad mileage, 
bank clearings increased to over 856,110, 250,- 
455 and the foreign trade increased to SI, 487,- 
000,000. 



EVENTS SINCE 1860 129 

1890 

This was a year of crop failures and the 
last year of the period of prosperity. The coun- 
try was in a very prosperous condition and as 
the average man did not realize or even suspect 
a change in conditions until about a year after 
fundamental conditions began to show a decline, 
there was no increase in failures, but rather a 
decline. The iron mills had not yet caught up 
with their orders so that this year witnessed the 
greatest iron production in the history of the 
country, amounting to 9,202,000 tons. The 
price, moreover, increased to $18.41 with the 
same number of new miles of railroad construct- 
ed as the previous year, which, under existing 
conditions, was very great. Immigration showed 
further increase, bank clearings jumped to over 
$60,546,563,997, and the foreign trade to over 
$1,647,000,000. Both of these latter figures were 
the largest in the history of the country. Mon- 
ey rates, however, were increasing and the sup- 
ply of new funds rapidly diminishing. 

In addition, this year saw the effects of "Mor- 
gan's Gentlemen's Agreement" adopted by the 
large railroad systems. Bankers, however, 
were now watching for the proverbial "unex- 
pected event," and this came in the Baring failure. 



130 . BUSINESS BAROjVIETERS 

This failure, although of an English firm, seri- 
ously affected the stock market of America and 
students of underlying conditions recognized it 
as the death-knell of the period of prosperity, 
having the same eft'ect as the "Harlem Corner" 
in 1866, the great fires of 1872, and the shoot- 
ing of President Garfield in 1881. By saying 
that, in the eyes of the great bankers and mer- 
chants, it brought this period of prosperity to 
an end, we do not refer to the immediate drop 
in prices caused directly by the Baring failure, 
as the prices rebounded immediately afterward. 
But we refer to the decline which started eigh- 
teen months later, in the early part of 1892. 
However, the wise investors and merchants did 
not wait for 1892 before preparing to liquidate. 
In fact, many had already liquidated before the 
Baring failure, when the average price of stocks 
stood at over $140, knowing that such extremely 
prosperous conditions as existed in the early 
part of this year, could not possibly last. 

1891 

Although the McKinley tariff, passed in the 
fall of 1890, temporarily relieved the tension, 
yet the money situation was very unsatisfactory. 

Although bankers and merchants acquainted 
with true conditions were liquidating with all 



EVENTS SIXCE 1860 131 

possible speed, the average manufacturer and 
store-keeper had not the slightest idea of any 
change in conditions. This was especially true, 
owing to the abundant crops of this year 189 1, 
which amounted to over 2,670,000,000 bushels, 
the largest crops in the history of the country 
up to this time and not again to be exceeded, 
excepting slightly in 1896, until 1902, a period 
of ten years. These fine crops caused the news- 
papers to be especially bullish, and, as there was 
no appreciable increase in failures and but a 
small decrease both in iron production and in 
the number of miles of new railroad construc- 
tion, this was a prosperous year for the country 
as a whole. Immigration again increased by 
110,000 arrivals and foreign trade to 1,729,000,- 
000, although bank clearings fell off slightly. 
These factors enabled the bankers and merchants 
to keep down money rates from further advanc- 
ing and to bolster up the market in order to un- 
load their securities and merchandise. Conse- 
quently, although true conditions were very far 
from normal and the pendulum was far over 
to the dangerous side, yet, as may be seen 
from the periodicals and daily papers of that 
year, the people thought 1891 a very satisfac- 
tory year and that prosperity was bound to con- 
tinue for many years to come. 



132 BUSINESS BAROMETERS 

1892 

With the beginning of 1892, syndicates and 
stock operators who had not already liquidated, 
made one great and final effort to put up the 
market, and succeeded. Those who did not 
liquidate in 1890 when the average for our ten 
stocks stood at $141, or in the preceding year 
when they could have also sold at the same price, 
now" sold on the receipt of the first private crop 
returns. As detected early by such men, this 
was a year of poor crops, the total yield of 
Vv'heat and corn declining to about 2,140,000,000 
bushels. However, failures still showed the very 
low percentage of .887^ and pig iron production 
again increased to 9,157,000 tons. The price, 
on the other hand, decreased to $15.75 ^ ton. 
New railroad construction held its own at 4*584 
rniles ; immigration, again increased to 623,000 ; 
bank clearings to over $61,919,126,622, and the 
volume of trade to over $1,850,000,000. These 
more satisfactory figures were printed and dis- 
tributed broadcast by the press as an apparent 
demonstration that the period of prosperity was 
certain to continue several years longer, 
although prosperity had already lasted too long. 
Moreover, this was also an election year and 
the banking situation was very unsatisfactory. 



EXTENTS SIXCE 1860 133 

although money rates were temporarily de- 
pressed. Therefore, students of the situation 
saw clearly that the period of decline was well 
under way, although this was not realized by the 
average investor and business man until the 
following year. In the fall of 1893 Ex-Presi- 
dent Cleveiland was re-elected and, although 
prices were held up a few months longer by 
sheer manipulation, the end was plainly in sight. 

1893 
This feeling became generally evident early 
in 1893 when the crop reports began to be pub- 
lished, and they were none too pessimistic, as the 
final total crop of wheat and corn amounted to 
only about 2,000,000,000 bushels. Failures in- 
creased sharply to 128% and pig iron production 
fell off about 2,000,000 tons with a decrease in 
price of over $1 a ton. Only 2789 miles of rail- 
road were constructed and immigration fell off 
to 502,000. Bank clearings fell off to $53,143,- 
527,108 and foreign trade to $1,714,000,000. 
This year the change in conditions became appar- 
ent to all classes, as mills began to run on half 
time, collections became poor, and general condi- 
tions unsatisfactory. In fact, support of all kinds 
had been withdrawn, every commodity, including" 
money, was allowed to seek its own level, and 



134 BrSIXESS BAR031ETERS 

every merchant to take care of himself as best 
he could. This therefore was a year when se- 
curities might have been repurchased. In fact, 
those persons who had sold in 1890 at $141 now 
repurchased at $98 as they had waited three 
years. Those who sold out during the preced- 
ing year at $142 had several opportunities dur- 
ing the coming few years to purchase these se- 
curities at almost as low figures, as they dropped 
to $105 in 1894, $103 in 1895 and $100 in 1896. 

1894 
This year in reality witnessed the greatest 
crop failure in the history of the country. The 
crops had fallen below 1,600,000,000 bushels 
during the 70s, yet a very much smaller area 
was then imder cultivation and conditions were 
entirely different. As figures clearly show, a 
small increase or decrease in crops does not 
affect business excepting sentimentally, but a 
great failure such as was witnessed in 1894 
gave the country a shock from which it took 
years to recover. The business failures of this 
year showed no decrease over the preceding 
year, but the output of iron fell to 6,657,000 
tons with a very low average price of $12.66 
a ton which was less than the cost of production. 
The new railroad mileage decreased to over 



EVENTS SINCE 1860 135 

2157 miles and immigration showed the great- 
est falling off in percentage in the history of 
the country. This same statement is true of 
bank clearings which fell off from $54,143,527,- 
108 in 1893 to $45,460,058,609 in 1894. There 
was also a decrease in foreign trade. There- 
fore, this year was one of distinct depression, 
and for a long period to come, the country was 
to suffer from the effect of the calamity. In 
addition to the crop failures, the Pullman strike 
occurred, and the Wilson bill affecting the tar- 
iff was also passed ; in fact, 1894 was apparently 
the worst year since the Civil War. Neverthe- 
less, the banking situation was greatly improved 
and money rates again declined. 

189s 

This year was one of great gloom. The effect 
of the preceding two years, — during which so 
many bankers and merchants failed, and one- 
third of the total railroad mileage of the United 
States fell into the hands of receivers, — began to 
have its effects upon all labor and even upon the 
most hum'Elestore-keeper. Mills were shut down ; 
great poverty existed in the cities and distress 
was felt everywhere. At the beginning of this 
year there was no sign of improvement. As 
soon as the crop estimates were published, how- 



136 BUSINESS BAROMETERS 

ever, it was seen that they were very favorable, 
and when the harvest was computed at the end 
of the year a grand total of 2,618,000,000 bush- 
els was recorded. As the crop reports improved, 
they exerted a good influence upon general con- 
ditions. Failures decreased to 1.09% and iron 
production increased nearly 3,000,000 tons with 
an increase in price. New mileage, however, 
decreased to 1938 miles, immigration to 280,000 
persons, while foreign trade also fell off, 
although bank clearings showed an increase- 
Conditions doubtless would have taken a turn 
for the better had it not been for the very 
unfortunate conditions of the finances and 
the great exportation of gold. Although 
President Cleveland did everything within his 
power to uphold the gold standard and the credit 
of the United States, the drain was too heavy, 
especially after his famous Venezuela message. 
The possibility of war with our greatest foreign 
creditor, viz: England, naturally caused great 
excitement and prevented any improvement 
Vv'hich otherwise would have been due at this 
tinie. 

1896 
Notwithstanding the unfortunate exportation 
of gold and the Venezuela message of the 



EVENTS SINCE 1860 137 

preceding year, which temporarilly caused high 
money rates in 1896, Providence was gracious 
to the country and gave abundant crops, which 
exceeded those of the preceding year. Failures 
showed an increase and iron production a de- 
crease, both in tonnage and in price, yet there 
was a sHght increase in the number of miles of 
new railroad constructed and a distinct increase 
in immigration. New York bank clearings, and 
foreign trade. Therefore, although there were 
no signs of better times in surface conditions, 
underlying conditions became much sounder. 
Had it not been for the alarm felt at the Demo- 
cratic nomination of Bryan in June, this would 
have been from its very beginning, a year of dis- 
tinct improvement. When the election of McKin- 
ley in the fall of 1896 removed this cause of dis- 
trust, bankers and merchants who were studying 
the situation became convinced that a change for 
the better was imminent. 

1897 

Although the crops this year did not amount 
to the tremendous harvests of the two preceding 
years, they exceeded 2,430,000,000 bushels, which 
was very satisfactory. Moreover, the failures 
decreased to 1.26% and iron production in 
creased to over 9,650,000 tons. New mileage 
again increased to 2,188 miles, bank clearings 



138 BUSINESS BAROMETERS 

to over $57,229,070,956 and foreign trade to 
over $1,800,000,000. There was a still further 
decline in immigration this year, but other points 
were favorable and underlying conditions were 
becoming more and more satisfactory every 
month. As we have already suggested, however, 
the effect upon the country of so many shocks, 
beginning with the great crop failure of 1894 
and ending with the Bryan scare of 1896, was 
too severe for rapid recovery. Accordingly, 
even this year, stocks which were sold in 1890 or 
1892 for about $140 could still have been pur- 
chased at an average of $103. Money rates, 
however, were again very much lower in 1897 
which again gave an impetus to new enterprises. 

1898 
With this year, however, the period of im- 
provement was well under way and it was aided 
by another year of good crops, the total amount- 
ing to about 2,600,000,000 bushels. Moreover, 
failures decreased to 1.10% and iron production 
again increased to over 11,773,000 tons, although 
at an average price of $11.66, the lowest known. 
OVer 3199 miles of new railroad were construct- 
ed and immigration held its own. Bank clear- 
ings showed a tremendous increase, amounting 
to over $68,826,557,324 and the foreign trade 



E\^NTS SINCE 1860 139 

to over $1,847,000,000. Although the Spanish 
war temporarily disarranged business, it was so 
short, that it acted in the end as a great stimu- 
lus to trade ; therefore, the end of the year found 
the country prosperous with money rates grad- 
ually strengthening to correspond. 

1899 
This was the beginning of a year of distinct 
prosperity. The country was again blessed with 
good crops amounting to over 2,625,000,000 
bushels ; money rates were very low, failures de- 
creased to the unprecedentedly low figure of.8i% 
and iron production increased to over 13,620,- 
703 tons with a jump in price to $18 a ton. 
Moreover, 4,512 miles of railroad were con- 
structed and immigration increased to over 311,- 
000. The most phenomenal figures of the year 
occurred in bank clearings, which shows a figure 
of over $94,047,400,783 compared with $57,229,- 
070,956 in the two years previous. Foreign 
trade also increased so that this year was one 
of marked success in every avenue of commerce 
and industry. In fact, stocks which had aver- 
aged closer to par for the preceding five years 
increased to a maximum of $151, an increase 
which was to continue with its ups and downs 
until 1902. 



140 BUSINESS BAROMETERS 

1900 

Although this was election year, always one of 
more or less inactivity, the dullness of this year 
was not as severe as usual, owing to the many 
preceding years of severe liquidation and the 
present low money rates. ^loreover, crops were 
again full, reaching a total in excess of the pre- 
ceding year, both in percentage and price. New 
railroad construction fell off slightly, but immi- 
gration increased over 130,000, or to 448,572, 
and foreign trade to over $2,240,000,000. There 
was a slight falling off in clearings and money 
rates increased, but this was nothing more than 
to be expected in a presidential year. Bryan 
again ran and he did not talk so much about 
free silver, but i\IcKinley, with Roosevelt's aid, 
was elected by a tremendous majority. 
1901 

Had it not been for poorer crops, this would 
have been a year of tremendous prosperity. As 
it was, failures remained at the very low figure 
of .90%; iron production increased to 15,800,- 
000 tons ; new mileage constructed to over 4900 
miles; immigration to over 487,000 and bank 
clearings to the unprecedentedly high figure of 
$109,267,527,182 with a corresponding increase 
in foreign trade, while money rates were fairly 
easv. 



E\^ENTS SINCE 1860 141 

In the fall of this year, however, President 
McKinley was shot. This resulted in consider- 
able gloom among many bankers and merchants, 
but although the stock market temporarily re- 
ceded at the time of his death, it quickly reacted. 
However, as there had been several years of 
marked prosperity, students of the situation rec- 
ognized in this event the sign for changed con- 
ditions. The Northern Pacific corner which had 
occurred earlier in the year, was in itself an un- 
favorable sign and the two events together 
caused the most cautious investors to change 
their positions from the bull to the bear side of 
the market. 

1902 
If this had also been a year of poor crops, a 
very severe depression would probably have 
set in at once, but this year we again had the 
largest crops on record up to this time, amount- 
ing to over 3,193,000,000 bushels. Moreover, 
the percentage of failures continued very low at 
.937c; iron production increased to 17,821,000 
tons with an increase in price to over ^22 a ton. 
Over 5,000 miles of new railroad were con- 
structed and bank clearings increased to $118,- 
023,298,740. Foreign trade held up nearly to 
the high figures of the preceding year. 



142 BUSINESS BAROMETERS 

This was one of the years when the average 
business man and manufacturer were very op- 
timistic; when the daily papers were prophesy- 
ing still higher prices and still greater activity, 
and when the surface conditions were apparent- 
ly more satisfactory than ever before. How- 
ever, underlying conditions were growing less 
satisfactory every day for money was becoming 
dear, and securities in tremendous volumes were 
being very rapidly issued. This latter fact should 
be carefully noted as the figures on a large num- 
ber of the subjects studied under Fundamental 
Statistics then showed no sign of any approach- 
ing period of depression. In fact, this was a 
year when there was considerable discussion 
among statisticians as to whether or not the fig- 
ures collected did signify a decline. Lien, how- 
ever, who recognized the meaning of the tre- 
mendous increase in new securities issued, knew 
that a day of reckoning must come soon, and 
consequently the signal was given to liquidate. 
The average of the ten stocks which could have 
been purchased in 1897 at 103 reached a max- 
imum of 201 and those who sold had the ad- 
vantage of a splendid profit. However, there 
were many who did not believe that a period of 
depression was about to com.e and therefore did 



EVENTS SINCE 1860 143 

not sell, but carried their stocks through the 
depression of the following year. 
1903 
This year there was a falling off in crops, the 
total production of corn and wheat amounting 
to only 2,800,000,000 bushels; the percentage of 
failures increased to 1.12% and iron production 
showed but a slight increase with a falling oft 
in the price. Moreover, railroad construction 
decreased to 4675 miles and bank clearings fell 
off to $109,209,187,764. Immigration and foreign 
trade showed an increase and money rates were 
again high. In justice to those statisticians who 
found no signs for a depression of 1903, it must 
be said that these figures were not extremely 
unsatisfactory and under certain conditions 
would be considered satisfactory. In fact, had 
it not been for the very great increase in securi- 
ties, there probably would have been no depres- 
sion this year. However, owing to the stock 
market troubles, labor troubles, and certain 
other conditions, this year was one of depression, 
although the depression lasted only one year. 

1904 

This year there was an increase in crops and 
the percentage of failures decreased. Although 
the production of iron decreased, the number of 



144 BUSINESS BAROMETERS 

miles of new railroad increased and immigra- 
tion almost held its own. Bank clearings also 
increased to $112,621,022,711 and foreign trade 
slightly. Money rates again became lower and 
the banking situation became much sounder. 

Moreover, this year the disagreement among 
statisticians as to underlying conditions was 
cleared up and all united in recognizing that 
whatever the figures on underlying conditions 
had shown during the past tw^o years, there 
was now a distinct improvement and those who 
sold stocks at an average price of over $200 in 
1902 now repurchased at an average of $152. 

1905 
Again tremendous crops blessed the country 
and failures decreased to .S>s%- Iron production 
increased to about 23,000,000 tons and the price 
increased to nearly $18 a ton. Over 5,050 miles 
of new railroad were constructed and immigra- 
tion increased to the unprecedentedly high figure 
of 1,026,499 arrivals. Bank clearings made the 
greatest jump in the history of the country, in- 
creasing from $112,621,012,711 in 1904 to $143,- 
909,448,446 in 1905. Foreign trade likewise in- 
creased to over $2,600,000,000. Moreover, low 
money rates prevailed and industries of all kinds 
resumed operation. 



EVENTS SINCE 1860 145 

1906 

This year produced the greatest crops in the 
history of the United States, the total amount- 
ing to over 3.620,000,000 bushels while failures 
decreased to the lowest percentage, namely .'jy%. 
Iron production again increased to over 25,000,- 
000 tons and the price to about $21 a ton. 5642 
miles of new railroad were constructed and im- 
migration again increased to over 1,100,000 per- 
sons. The most wonderful showing, however, 
occurred in the figure for clearings which 
amounted to over $159,808,640,000, with a for- 
eign trade figure of nearly $3,000,000,000. 

This and the preceding year were of such 
marked prosperity and the prices of stocks were 
so very high that many of the large interests be- 
gan to liquidate and the stocks which were pur- 
chased for around par in 1897, sold at over 200 
in 1902, and were again purchased for about 
150 in 1904, were again sold at prices ranging 
from 210 to 220 in 1905-1906. Not only was 
the prosperity too great in 1906 to be normal ; 
but money rates were increasing and political 
conditions became rather unsatisfactory and 
President Roosevelt's various messages and law- 
suits were the ''unforeseen events" which caused 
the change in conditions. Some students of the 
situation blamed President Roosevelt for the 



146 BUSINESS Bx\ROMETERS 

change in conditions, but had he not called a 
halt, very much greater disaster would have 
come to the country later on. He did call a halt 
and although indirectly this was a great benefit to 
the country, its immediate effect was to cause the 
large bankers and merchants to change their po- 
sition from the bull to the bear side of the mar- 
ket. Liquidation, therefore, commenced, securities 
and merchandise were sold and stocks of all 
classes declined in price. The money situation 
was especially strained as the depression of 1903 
was not severe enough to liquidate many ac- 
counts which should have been cleared up. 
Therefore In March of the following year, the 
large interests withdrew their support, stocks 
tumbled in price, banks were allowed to fail and 
again people were allowed to shift for them- 
selves. 1907 

In the spring of this year came reports of un- 
favorable crops which, in fact eventually amount- 
ed to over 3,200,000,000 bushels, but money again 
w^as scarce and the scarcity was sufficient to 
cause the last of the stock operators to change 
their position from the bull to the bear side of 
the market. Failures began to increase. There 
was no appreciable increase in iron production. 
The number of miles of new railroad constructed 
fell to 5499 and the bank clearings to $145,175,- 
733493. Immigration showed an increase and 



EVENTS SINCE 1860 147 

also the balance of trade. Students of the sit- 
uation had made up their minds that a change 
was coming and that nothing could withstand 
it. As is usually the case, there was no change 
in surface conditions until the fall, but under- 
lying conditions began to rapidly become more 
unsatisfactory early in the year and all who 
were studying the published figures had fair 
warning of the coming period of depression. 
1908 

The crops for 1908 likewise were not very 
satisfactory, amounting to only 3,276,744,000 
bushels, — about the same as 1907. Failures, 
moreover, increased to 1.08; bank clearings 
were reduced to $132,272,000,000; the iron out- 
put was only 15,936,018 tons, with a gradual 
reduction of price. The volume of trade was 
$2,849,357,289. New railroad mileage was es- 
timated at 5.730. 

The decline In the stock market of the previous 
year was now being followed by a severe de- 
cline in manufacturing and general business- As 
has universally been true in the past, high mon- 
ey rates were followed by a break in the stock 
market, which in turn was followed a year later 
hy a business depression, accompanied with low 
money rates. These rates held low for about 
another year when the price of stocks began to 
rise and commodity prices began to fall. The 
country was at this point on December 31, 1908. 




CHAPTER VI. 

TWENTY-FIVE SUBJECTS STUDIED UNDER FUNDA- 
MENTAL STATISTICS 

HEN interpreting the meaning of 
the following twenty-five sub- 
jects, one must remember that it is 
first necessary to decide in which 
of the four periods the country 
is: whether it is in a period of de- 
pression, a period of improvement, a period of 
prosperity, or a period of decline. The figures 
always show this very plainly; but one can read- 
ily check his opinion by referring to our Week- 
ly Barometer Letters which always take a de- 
cided stand at this point. This first step, how- 
ever, is absolutely necessary, as it is impossible 
to determine the duration of the present period, 
w^hen the next change will come, and what it 
will be (which of course is what the banker, 
merchant and investor desires to know) without 
knowing what the present conditions indicate. 
This is due to the fact that the same change in the 
figures of a given subject signify different results 
under different periods ; for example, during a 
period of depression, an increase of Bank Clear- 
ings is a favorable sign, but during a period of 



THE TWEXTY-FIVE SUBJECTS 149 

prosperity a great increase is a dangerous sign. 
After deciding in what period the country is, 
each set of subjects must be interpreted in ac- 
cordance Avith certain rules. In other words, 
with a given subject a decrease signifies one 
thing, an increase signifies another, while no 
change signifies a third. Therefore, the figures 
on each subject should be examined independent- 
ly to ascertain whether the figures show a de- 
crease, an increase, or no change. The new 
figure, what ever it is, will then be interpreted 
as to whether it shows "more satisfactory con- 
ditions," "less satisfactory conditions," or "un- 
certainty." After reaching this conclusion, rel- 
ative to what the figures on the subject under 
consideration signify, a note should be made of 
the result. 

Each subject is treated in this manner and a 
conclusion reached on each. All of these con- 
clusions are then summarized and one counts 
how many subjects signify an improvement, how 
many signify a decline and how many signify 
something else. All of these are averaged, 
although a dift'erent amount of weight may be 
given to one subject than to another, and a con- 
clusion reached as to the duration of the present 
period and what the next change will be. 



150 BUSINESS BAROiETERS 

In short, the study of Fundamental Statistics 
consists simply of obtaining the latest figures on 
any one subject, noting their trend and comparing 
both the figures and the trend with normal fig- 
ures and normal trends for said subject, in treat- 
ing all the various subjects in this same way 
and finally deducing one final conclusion as to 
whether the figures and thei general trend of the 
figures on all the subjects, taken as an entirety, 
are becoming m.ore normal or less normal. 

// the summary figure for present condi- 
tions is much greater than that for normal con- 
ditions, this signiHes that there may he a change 
for the zvorse at any time; but if the summary 
figure for present conditions is less than that 
for normal conditions, this signifies that there 
may he a change for the better at any time. 
Moreover, the greater the difference hetzveen the 
respective summary figures for present condi- 
tions and for normal conditions, the sooner 
the change may me expected. When the sum- 
mary figures are approximately the same, the 
conditions may he expected to remain as they 
are or to he zvhat is technically knozvn as ''ir- 
regular." 



BriLDING STATISTICS 151 

Wealth, Building and Real Estate Operations 
as Barometers of the Country's Growth 

' "Wealth," according to Theodore E. Burton, 
comprises " all things which are alike useful, 
limited in supply, and transferable. All wealth 
is produced from or created by, land, labor, or 
capital. Land includes every form of nature in 
earth, seas, or air, together with the natural 
forces which may be set at work. It is the 
source of our so-called ''raw materials." La- 
bor includes physical strength and exer- 
tion, and the mental qualities which furnish 
them with method and ingenuity. 

Capital, technically defined, is wealth with- 
held from immediate consumption for the pur- 
pose of producing wealth in the future. It in- 
cludes food, clothing and fuel for support of 
those engaged in production of wealth, neces- 
sary seed for planting, raw materials for the 
finished products of manufactures or, if we look 
at the subject from the standpoint of the em- 
ployer or capitalist, money for wages and the 
purchase of supplies. These may be included 
in the term circulating capital. There is also 
fixed capital, which included tools, machines, 
factories, buildings occupied or used by those 
engaged in productive employment, improve- 
ments upon land, likewise ships and railways with 



152 



BUSINESS BAROMETERS 



all their equipment. Nations are rich or poor not 
in proportion to the amount of land or natural re- 
sources which they have, but in accordance as 
they have an abundance or lack of capital." 

The above describes what is technically known 
as 'Vealth." A concrete example of what con- 
stitutes wealth may be found in the following 
tables. 

The figures are made up by the Bureau of 
the Census, Washington, and as reported for 
the census years are carefully compiled records 
of actual values as appraised under the general 
terms, real and personal property. The figures 
for all years between the census years are es- 
timates, and show proportional changes, based 
somewhat upon partial returns in some of the 
items included. The following tables show ex- 
actly the forms of wealth comprising the total 
$107,104,211,917, the estimate of 1904. 



ESTIMATED WEALTH 
STATES 

$107, 104, 2 
Real property taxed .. $55,510: 
Real property exempt 6,831, 
Live stock 4,073, 


OF 1 

Latest ] 
1904 
ill. 917 

-247.564 
-244.570 
-791.736 

(89,863 


rHE UNITED 

Estimate 
1900 

$88,517,306,775 

$46,324,839,234 

6,212,788,930 

3,306,473,278 


Farm implements and 

machinery 844,9 


749.775.970 



BUILDING STATISTICS 153 

Gold and silver coin and 

buillion 1,998,603,503 1,677,379,825 

Manufacturing machin- 
ery, tools, etc 3,297,754,180 2,541,046,639 

Railroads and their 

equipments 11,244,752,000 9,035,732,000 

(a) Street railways, etc. 4,840.546,909 3,495,228,359 

(b) All other property . 18,462,281,792 15,174,042,540 
Grand total 107,104,211,917 $88,517,306,775 

a. Street railways, etc. (itemized) 

Street railways $2,219,966,000 $1, 576.197. 160 

ielegraph systems 227,400,000 211,650,000 

Telephone systems 585,840,000 400,324,000 

Pullman and private cars .. . 123,000,000 98,836,600 

Shipping and canals 846,489.804 537,849.478 

Privately owned water works 275,000,000 267,752,468 
Privately owned electric light 

and power stations 562,851,105 402,618,653 

Total 4,840,546,909 3.495.228,356 

b. All other property (itemized) 

Agricultural products $1,899,279,652 $1,455,069,323 

Manufacturing products 7,409,291,668 6,087,151:. 108 

Imported merchandise 495-543.685 424.970,593 

Mining products 408,066,787 326,851,517 

Clothing and personal orna- 
ments 2,500,000,000 2,000,000,000 

Furniture, carriages, etc .... 5,750,000,000 4,880,000,000 

Total 18,462,281,792 15,174,042,540 

NOTE:— C. A. Conant, who was authorized by the Census to 
estimate outstanding securities in the United States, gave in the 
Atlantic Monthly for January 1909 a preliminary estimate of $34, 514. 
351,382 or $414-54 per capita, of which $10,120,418,699 is held by 
holding companies. He figured the outstanding securities in Great 
Britain as $26,400,000,000 or $616.97 per capita; in France $19,500,- 
000,000 or $500.94 per capita; Germany $10,000,000,000 or $177.41 
per capita; and in Holland $2,200,000,000 or $405.08 per capita. For 
fourteen countries the aggregate is $111,077,764,333 or $196.17 per 
capita. 

Because the census figures are the only sta- 
tistics which give the actual value of prop- 
erty in the country, and since a complete state- 
ment is made only once in ten years, the needs 



154 BUSINESS BAROMETERS 

of fundamental statistics lead to the adoption 
of certain other reports which may be expected 
to serve as barometers of the conditions termed 
wealth by our first proposition. 

Building statistics, including railroad and 
municipal construction, give us figures which 
show that the value of land is improving more 
or less, that railroad property is increasing, or 
that towns and cities are adding lighting plants, 
water supplies, or public buildings in greater 
or less amount. Because of a new house cost- 
ing $10,000 all land on the same street im- 
proves and the valuation of the whole city is 
some thousands of dollars greater at the next 
census taking. A factory put in the same street 
might reduce the real estate value as residence 
property, but would so react upon the city as 
a whole as to greatly increase its entire wealth. 

The difficulty of obtaining accurate reports 
of building is one that has been an obstacle 
heretofore in the way of systematic study of 
the subject. The laws of cities and states are 
so different, that the returns from building per- 
mits alone, are not reliable as a basis. But 
from the point of view of the contractors, an- 
other set of figures is to be had. The best of 
these have been developed by the F. W. Dodge 



BUILDING STATISTICS 155 

Co., of Boston. The business of this firm is 
to make a thorough canvass of the principal- 
fields of constructive activity in order to fur- 
nish accurate information of business openings 
for contractors and supply firms of all kinds. 
Reports gathered by this very thorough sys- 
tem of learning of all building in process of 
construction in New England, have been pub- 
lished from time to time for many^ years. 
Through the New York, Chicago and other 
ofiices, the firm has in its possession very ac- 
curate, well-classified statistics of new con- 
struction, both projected and started, in other 
sections of the country, which they are now 
putting in shape for the service of fundamental 
statistics. The reports may be expected to cov- 
er the new work, both in private and municipal 
building and railroad construction, while the 
values given will be conservative and the result 
of careful inquiry by trained observers. 

Fire losses as reported m.onthly, include all 
fires, and show the total destruction of tim- 
ber, rolling stock of railroads, wharfage and 
shipping, as well as buildings of all kinds. As 
in the case of construction or building statis- 
tics, the amounts given in these fire loss tables 
cannot be compared directly with the census 



156 BUSINESS BAROMETERS 

figures on wealth. Sometimes the insurance loss 
is given, sometimes the assessed valuation, 
sometimes an estimate, as in buildings and con- 
tents under appraisal. The direct loss by for- 
est fires is hard to determine exactly, while the 
indirect losses, so well-known to the students 
of forestry, are incalculable at frequent inter- 
vals. The monthly record, however, is a val- 
uable indicator of conditions likely to contribute 
to the improvement or decline of business and 
should, for that reason, be watched. Con- 
ditions of poverty following fires, or gen- 
eral improvement as a result of new construc- 
tion, are both necessary and valuable barome- 
ters of business and show where to increase or 
decrease investment in land, labor and capital 
for the increase of wealth. 

Another factor of importance, and bearing a 
relation to the second group of subjects we are 
considering, is the real estate business. To 
understand rightly the financial condition of 
this country, we should know the history of 
real estate booms and watch for increased rents 
either of land or buildings. During the hard 
times of the winter following the crisis of 1907, 
some of the leading manufacturers reduced their 
rents fifty per cent, some more and some less. 



BtJIIiBIXG STATISTICS 157 

By such means, they could hope to keep their em- 
ployees on hand for renewed production. Such ac- 
tion was an attempt to meet the wage-earner half 
way and is directly opposed to the spirit of that 
real estate boom, the chief phase of which is 
an arbitrary raising of rents for tenements of all 
kinds. Such an advance is usually seen in times 
of improvement and especially towards the cul- 
mination of a period of prosperity when rising 
wage-scales attract the attention of the house 
owner, who raises his rents, and reaps his har- 
vest, at the same time that commodity prices 
and security markets are rising. A study of 
the statistics will show that real estate values 
are very good business barometers. New land 
developed, irrigation systems introducdd, and 
a variety of similar factors may seem to be the 
causes of booms here and there; but none of 
these enterprises can be carried on without the 
active investment of capital and that activity 
will not continue unless conditions are right. 

So, for the purposes of fundamental statis- 
tics, beside the official figures on wealth, there 
should be included these three subjects: new 
railroad and building construction, real estate 
values and operations, and fire losses. These 
subjects give us a gauge of conditions more 
frequently than once in ten years. 



^53 BUSIXESS BAROMETERS 

As the business man is much more interested 
in the relation of wealth to prosperity than in 
any definitions, it is interesting to note histor>^ 
and ascertain how the wealth of the country has 
affected conditions in the past. The first great 
crisis which this country experienced was in 
1837; it was preceded by six years of great ac- 
tivity. The railroad mileage of the country had 
grown from 23 miles in 1830 to 1500 miles in 
1837. Simultaneously with this growth in rail- 
road mileage, new towns had been founded, new 
enterprises opened, desert lands had become tax- 
able, farm property and the wealth of the coun- 
try had rapidly increased. If the reader will 
turn to the records of this time, he will find 
that there w^as a greater increase between 1832 
and 1837 than during any previous ten years 
of our history. A great number and variety of 
new enterprises were started, the bank deposits 
were large and there was great interest in trad- 
ing, shipping, manufacturing and real estate. 
In fact, this great increase in real estate specula- 
tion resulted in greatly increasing the assessed 
valuation of both city and country property. 

The second great crisis came in 1857, which 
likewise was preceded by a period of great in- 
crease in wealth. iVfter the panic of 1837, came a 



BUILDIXG STATISTICS 159 

period of great depression and, although condi- 
tions improved in 1844 and 1845, there was no 
great advance until the discovery of gold in 1849- 
In 1852, California was actually sending millions 
of dollars worth of gold to New York. Ship- 
ping received a tremendous impetus both on ac- 
count of the trade with California and of 
the Crimean War in 1854 and 1855. 
There was also a great increase in railroad 
mileage, which advanced from only 5600 miles 
in 1847 to 24,500 miles in 1857. In other words, 
in 1830 there were but 23 miles of railroad and 
in 1837, the year of the panic, this had been 
increased to 1500 miles. During the ten years 
between 1837 and 1847, less than 3400 miles of 
new track were constructed, yet in the ten years 
trom 1847 to 1857 about 20,000 miles were con- 
structed. When studying such figures it ap- 
pears very easy to have prophesied a panic for 
1857. With the building of these 20,000 miles, 
thousands of new towns were settled, millions 
of acres of hitherto untaxed land became tax- 
able as farm land, and a vast number of manu- 
facturing and other enterprises were started. 
This resulted in another great increase in wealth 
equalled only by the increase v/hich preceded the 
panic of 1837. As a result, the panic of 1857 



160 BUSINESS BAROMETERS 

followed, which resulted in bankruptcies, sui- 
cides, and widely distributed destitution. 

The third great crisis was in 1873 ; this was 
caused by a number of factors and the increase 
in wealth was certainly one of them. The Civil 
War was accompanied by a great destruction 
of property and a consequent reduction in 
wealth. This was due partly to deterioration of 
values and the depreciation of the currency; but 
largely to the fact that the attention of the peo- 
ple had been turned away from productive in- 
dustry. Plough-shares had been turned into 
swords with the accompanying decrease in pro- 
duction. When the Civil War was over, both 
the South and the North again gave their at- 
tention to agriculture, manufacturing and com- 
merce, and the result w^as an unprecedented re- 
bounding. During the early 'sixties, taxable 
property decreased; during the early 'seventies 
it rapidly increased. The gain in wealth be- 
tween 1868 and 1873 w^as greater than it ever 
had been in the history of the country. 

If later panics (that is, the- panics of 1884, 
1893 and 1903) are studied, the same law will 
be found to be true in these cases. We can 
therefore confidently affirm that a *'Teriod of 



BUILDING STATISTICS 161 

Abnormal Increase in Wealth" is sure to be fol- 
lowed by a "Period of Depression." 

These illustrations are sufficient to show how 
deeply the investor's and merchant's interests 
are concerned in this subject. Whether a small 
store-keeper, a retailer, a manufacturer or great 
merchant, his welfare is most intimately related 
to the total wealth of the country. Many les- 
sons for all classes of people may be drawn 
from this fact. 

The following are certain conclusions relative 
to ''Building Operations." 

1. Daring a period of Business Depression. 

(a) An increase^ forecasts better condi- 
tions. 

(b) A decrease forecasts continued de- 
pression. 

(c) No change signifies conditions to be 
stationary. 

2. During a period of Improvement follozving 
a period of Business Depression. 

(a) An increase forecasts a period of 
prosperity. 

(b) A decrease forecasts a set-back. 

(c) No change suggests caution. 

3. During a period of Prosperity. 



162 BUSINESS BAROMETERS 

(a) A great increase usually calls for cau- 
tion. 

(b) A decrease may tend to lengthen the 
period of prosperity. 

(c) No change signifies conditions to be 
stationary. 

4. During a Period of Decline Folozving a 
Period of Prosperity. 

(a) An increase is indicative of further 
trouble. 

(b) A decrease is natural under these 
conditions. 

(c) No change suggests caution. 

Money in Circulation 

This subject may, at first thought, seem un- 
interesting and of little concern to the merchant 
or manufacturer; yet, as a matter of fact, the 
"Amount of Money in Circulation" is of vital 
interest not only to the merchant and manufac- 
turer, but also to the humblest store-keeper and 
day laborer. The trade of the corner grocery 
store is regulated by the amount of money in 
circulation in the neighborhood ; and the amount 
of money in circulation in the neighborhood is 
dependent upon the amount circulating in the 
entire country. As the local banks in every 
small town have deposits in some large city 



MOXEY IX CIRCULATION 163 

such as New York, Chicago or St. Louis, mon- 
ey cannot be abundant in one city and scarce 
in another, except for a very short time. The 
banks of the various cities are so related through 
the great banking institutions of the large 
cities, that money — like water — immediately 
seeks its own level. As a result, all parts of 
the country must prosper or suffer in accordance 
with the amount of money in circulation. The 
store-keeper must, therefore, study figures of 
the entire country, and not simply the condi- 
tions in his own town or in his own neighbor- 
hood. 

]\Iany a mill has been closed and many a 
laborer ibeem thrown out of e^nployment be- 
cause employers could not obtain enough actual 
money to pay wages. In times of prosperity 
such conditions are hard to conceive; neverthe- 
less, they have happened and will recur. Some- 
times mills continue to operate by paying their 
employees by check, although this is a very un- 
satisfactory method unless the checks can be 
readily cashed. We know of one city in Massa- 
chusetts where for several weeks in 1907, all 
of the factory hands and clerks were paid in 
checks, and moreover by checks marked "Pay- 
able only through Clearing House/' Checks so 



164 BUSINESS BAR03IETERS 

marked cannot be cashed. The holders can only 
deposit them in the bank and draw new checks 
against them. However, since these new checks 
were also marked "Payable only through Clear- 
ing House," it was still impossible for the em- 
ployees to obtain their cash. As 95% of the 
employees had no bank account, the only prac- 
tical method was for each to give his check to 
one of the local store-keepers, receiving credit 
for the amount. As the man was obliged to 
leave the full amount of the check at one store, 
he found it advisable to select a large depart- 
ment store, carrying dry goods, groceries, med- 
icines and other goods. The result was that 
the business of the small store-keepers, except- 
ing that derived from their regular "charge" 
customers, was almost ruined during this per- 
iod ; the cash business of a store that ordinarily 
amiounted to $icx) a day decreased to only $10 
a day. This is but one illustration; it shows, 
nevertheless, how vital an interest even the 
humblest classes have in the amount of money 
in circulation. 

It is of equal importance to the large mer- 
chants and to the manufacturers. The small re- 
tailer who buys only what goods he can sell, im- 
mediately, ceases purchasing as soon as his 
business diminishes. This immediately aflfects 



MONEY IX CIRCULATION 165 

the business of the larger manufacturer, who in 
turn ceases to purchase from the farmers and 
producers. Since the small manufacturer buys 
new material only as needed for actual manu- 
facture, he ceases purchasing in direct propor- 
tion to the reduction of his help. The great mer- 
chants and manufacturers do not feel the effect, 
possibly until later; but when the bloAV does 
come, they feel it to a greater extent than the 
small dealer. It may be plainly seen, therefore, 
that the amount of money in circulation direct- 
ly affects everyone, whether a laborer, clerk, a 
small store-keeper, a merchant, a large mxanu- 
facturer or the railroad company which trans- 
ports for all. 
The Terms Defined. 

In the discussion of this subject, two different 
"amounts" are referred to, viz; 

1. The net amount of working money in cir- 
culation. 

2. The gross amount of money per capita, 
whether hoarded or in use. 

These two amounts may be defined as follows : 
The ''net amount of working money in circu- 
lation" means the amount of actual cash held by 
the banks. When a farmer deposits in his bank 
money received from the sale of cotton in Liv- 
erpool, he increases the net amount of Vv'orking 



166 BUSINESS BAROMETERS 

money in circulation. This is likewise true when 
a bank imports gold from abroad. When a de- 
positor becomes frightened, withdraws money 
from a bank, and hides it in his house or in a 
safe deposit box, he decreases the net amount 
of working money in circulation. The same is 
true when Americans spend money in Europe 
or when money is sent abroad in payment for 
securities held in Europe. But "the net amount 
of working money in circulation" is affected in 
another way, namely ; by the amount of money 
that each man is carrying in his pocket. If a 
m.an carries eleven dollars in his pocket instead 
of one dollar, he seldom realizes that the act is 
affecting the financial condition of the country; 
but, as there are 15,000,000 working m.en in the 
United States, this would make a difference of 
$150,000,000 in the net amount of working mon- 
ey in circulation, or a difference of $500,000,- 
000 in the banking resources of the 
country. Thus the net amount of working mon- 
ey in circulation represents the amount which 
is actually in the banks or actually at work in 
commerce and industry; it does not include idle 
money stowed away in pocket-books or safe de- 
posit boxes. 

*The gross amount of money per capita" in- 
cludes all money in the United States whether 



MONEY IN CIRCULATION 167 

It is in the bank or buried in the ground, at 
work or idle. All money in the safe deposit 
boxes and in the pockets of individuals is count- 
ed in this item. This at the present time amounts 
to about $35.00 per capita based on the estimated 
population of the United States. The gross 
amount of money per capita simply represents 
the total of the gold and silver coins and bills 
and bank notes in existence, wherever located in 
the United States. It has been estimated that 
in order to keep this figure in the vicinity of 
$34 or $35 per capita, it Is necessary to create 
or import, about v$5o,ooo,ooo net In coin and bills 
each year. 
The Eitect upon the Merchant. 

Experience has shovv^n that the "net amount 
of working money In circulation" cannot be 
forecast by figures, but is dependent rather 
upon sentiment. In other words. Instead of be- 
ing dependent upon the financial condition, it is 
dependent rather upon the sentiment of the peo- 
ple. This net amount in circulation may remain 
practically constant for years until some large 
failure, scandal or rumor of war comes, when 
the people lose confidence and money stops cir- 
culating. In such cases everybody holds all he has 
in his possession and free circulation is stopped or 



168 BUSINESS BAROMETERS 

retarded. Moreover, the net amount of work- 
ing money is often independent of the gross 
amount of money per capita in circulation. 
Should a rumor be published in the morning 
papers that some great financial institution is in 
a critical condition, the net amount of money in 
circulation would immediately be affected to a 
greater extent than w^ould be possible through 
years of legislation; but the gross amount of 
money per capita would remain constant. Fur- 
thermore, such rumors, failures or scandals are 
the best warnings of impending contraction of 
the net amount of money in circulation. The 
study of statistics in such instances is of little 
value. In other words, as soon as such a thing 
happens, the merchant may be reasonably cer- 
tain that his trade will be diminished, and the 
effect of his curtailment will be felt by the 
wholesalers, the manufacturers and the railroads. 
On the other hand, the merchant should be 
equally on the watch for the time when confi- 
dence will be restored and when the people will 
decide to part with the money they have been 
hoarding. As it is human nature to hoard mon- 
ey in case of trouble, it is also human nature to 
forget this trouble quickly. Moreover, people 
seem unable to vrithhold money from circula- 



MONEY IN CIRCULATION 169 

tion beyond a certain length of time; they be- 
come uneasy under the loss of interest, and it 
finally occurs to them that their money is in 
more danger in their houses than when deposited 
in a bank. Thus periods of financial stringency, 
which are caused by the temporary withdrawal 
of money from circulating, are invariably fol- 
lowed by a great increase in the net amount of 
working money. Nevertheless, increase in the 
business of the local merchant does not increase 
directly in proportion to the increase of the net 
amount of working money. While business falls 
ofif when the zvorking money decreases, the re- 
verse is not true. When mills are closed and 
people are out of employment, they acquire fru- 
gal habits, and after the mills again start, they do 
not at once begin to spend; but they deposit 
their savings in a bank. The fact remains, 
nevertheless, that after these periods of fright, 
money becomes very plentiful with the banks 
and interest rates become correspondingly low, 
with a slow but gradual increase in business. 
The efficiency of money depends upon its rapid- 
ity of calculation and a contraction in the net 
amount of working money always causes a de- 
crease in general business which requires some 
time to bring it back to its normal state. 



170 BUSINESS BAROMETERS 

In the case of the "gross amount of money 
per capita," entirely different laws prevail. To 
quote from Theodore E. Burton's admirable 
book entitled ''Crises and Depressions" : — "Par- 
adoxical as it may seem, the starting point for 
crises and depressions may be found in abun- 
dance rather than in scarcity, whether in money 
or in capital." Here he refers to the ''total 
gross amount of money per capita" or the fig- 
ures which are shown by statistics. These sta- 
tistics may be obtained from the United States 
government, vv^hich prepares a table each month 
giving estimates. These figures usually shov\^ 
a continued increase up to a certain point, when 
a panic or depression comes over the country. 
This is probably due to the fact that panics and 
depressions are so often caused by over pros- 
perity, and that this gross amount of money per 
capita is a good barometer of prosperity. There- 
fore, if the gross amount of money in circulation, 
as reported by the government, shows a 
steady increase per capita for several years and 
the country is prosperous — mills running over 
time, labor in great demand, and everybody 
happy and contented — then the merchant and 
manufacturer should be on the watch for a turn 
in the tide. In other words, too large an amount 



MONEY IN CIRCULATION 171 

of money per capita is sure to be followed by a 
period of disaster and trouble. As "Pride com- 
eth before destruction and a haughty spirit be- 
fore a fall," so it is likewise true that "a large 
amount of money appeareth before a panic and 
a period of luxury before a period of depres- 
sion/' 

The following conclusions may be of interest 
relative to "Money in Circulation." 

1. During a Period of Business Depression. 

a. An increase signifies declining money 
rates, or more satisfactory conditions. 

b. A decrease signifies higher money rates, 
or less satisfactory conditions. 

2. During a Period of Business Improvement. 

a. An increase forecasts better conditions. 

b. A decrease forecasts a check or set- 
back. 

c. No change suggests caution. 

3. During a Period of Prosperity. 

a. A large increase calls for caution. 

b. A sudden decrease signifies higher mon- 
ey rates and calls for caution. 

c. No change signifies continued prosper- 
ity. 

4. During a Period of Decline foUoiving a 

Period of Prosperity 



172 BUSINESS BAROMETERS 

a. An increase forecasts more unsatisfac- 
tory conditions. 

b. A decrease forecasts higher money rates 
or less satisfactory conditions, 

c. No change suggests caution. 

Reports of the Comptroller of the Currency 

Each national bank is required to make five 
reports a year to the Comptroller of the Cur- 
rency. The reports are verified under oath by 
the president and cashier, are attested by at least 
three directors of the bank, and give in detail, 
the resources and liabilities on any day specified 
by the Comptroller. When the Comptroller calls 
for a report, it is always for a report of the 
condition of the bank on a date preceding the 
call. The report must be mailed to the Com.p- 
troller within five days after the request is made 
for it. Such reports are the basis of the most use- 
ful examinations of the banking situation, as they 
include figures from all national banks and are 
annually supplemented with figures relative to 
other banks. 

In addition to studying these figures indepen- 
dently, they should be studied in their relation 
one to the other. In other words, the "ratios'* 
should be studied and compared. This is one 
of the principal features of these reports as used 



REPORTS OF THE COMPTROLLER 173 

in connection with the study of 'Tundamental 
Statistics." They will be found more fully ex- 
plained under the headings of "Loans'* and 
"Cash." 

Loans of the Banks 

In analyzing reports of the Comptroller of 
the Currency, four distinct lines of investigation 
are followed, namely: 

(a) The ratio of bank ''Loans" to bank 
"Resources." 

(b) The ratio of bank "Loans and Invest- 
ments" to bank "Resources." 

(c) The ratio of "Cash" in the banks to the 
"Deposits." 

(d) The ratio of the "Cash" in the banks 
to the "Resources." 

These are four distinct subjects to be studied 
independently before making any deduction or 
forecasting business conditions. Yet there is a 
close relation between (a) and (b) and also be- 
tween (c) and (d). Therefore, in order to save 
both time and space, the first two are here treat- 
ed together, and the second two are treated 
together under another heading. 

Bank Loans: Bank loans include notes, dis- 
counts, overdrafts and all other forms of so- 
called liquid assets. Banks when first organized 



174 BUSINESS BAROMETERS 

were expected to serve two purposes: they were 
to receive money on deposit and to loan it to 
depositors, with the understanding that all de- 
posits and loans could be withdrawn or called 
for payment at any time. The most ideal con- 
ditions for banks today are to be found where 
business is kept most closely to the standard 
thus early laid down. All of the assets of a 
bank, other than cash on hand, etc., should con- 
sist of loans that can be liquidated within six 
months. Therefore, the term "Loans and Dis- 
counts" would include all notes, etc., which are 
either payable on demand or are payable within 
six months or a year at the utmost. 

Investments: In reality, a bank is loaning 
money to a corporation whether it purchases its 
iifty-year Debenture Bonds or its six m.onths 
notes. In either case the security is the same 
and the interest may be the same. For an inves- 
tor, the fifty-year bonds, if properly secured. 
are in most instances a more practical purchase 
than the note, but for a bank the same state- 
ment cannot be made. Strict adherence to the 
original principle of banking often demands that 
a bank shall refuse to purchase the bonds of a 
corporation of which it may willingly accept the 
notes. 



LOAXS OF TELE BAXKS 175 

Notes when purchased by banks may be listed 
under the head of "Loans and Discounts," but 
bonds so purchased must be Hsted under the 
head of ''Investments/' The national law for- 
bids national banks to purchase improved real 
estate, or real estate mortgages, except as a 
building site, because real estate cannot be read- 
ily sold, even although in many cases, it is the 
safest form of investment. Logically there seems 
to be no reason why a national bank should be 
allowed to buy fifty-year bonds and forbidden to 
purchase improved real estate, but the fact that 
the prohibition is made shows that the spirit of 
the law is against all forms of permanent in- 
vestments. Therefore, all stocks, Honds and 
notes, which do not mature for six months or 
more, come technically under the head of "In- 
vestments.'' As there is no law which states 
exactly the difference between "Loans" and "In- 
vestments," banks differ regarding the definition 
and many banks place under the head of loans, 
short time notes which do not mature for two 
or three years, — although technically such short- 
term notes should come under the head of "In- 
vestments." 

Resources'. The "Resources" of a bank are the 
same as the resources of any individual or na- 
tion. They include the notes, discounts, loans. 



176 BTJSEVESS BAROMETERS 

Stocks, bonds, real estate and other property 
which the bank holds. When a bank makes a 
total appraisal of its assets, figured on a conser- 
vative basis, the resulting figure represents the 
"Resources." The greater the proportion of 
''Loans" to "Resources," the less normal are 
banking conditions. 

We think that the above definitions in thiem- 
selves are sufficient to convince the reader of 
the truth of the following statement: 

(i) The hanking; situation of the country 
becomes more critical as the proportion of loans 
to resources increases, and is iir^proving as the 
proportion of loans to resources decreases. 

If all national banks confined themselves to 
loans and discounts, and made no permanent 
investments, excepting to the extent of their 
capital, it would be a very easy matter to judge 
the conditions in accordance with the above rule. 
As, however, practically all banks are placing 
more and more funds into permanent invest- 
ments, that item must be independently analyzed 
and the above rule must be supplemented by 
the following: 

(2) With a given fixed ratio of loans to re- 
sources, conditions become more critical as the 
proportion of investments to resources increases 



I.OANS OF THE BANKS 177 

and conditions improve as the proportion of in- 
vestments to resources decreases 

In other words, provided a constant relation 
exists between the funds loaned and the total 
resources, the general banking situation is 
strengthened whenever a bank disposes of long 
term bonds and reinvests the money in high 
grade commercial paper and the general bank- 
ing situation is weakened whenever a bank pur- 
chases long term bonds with money received 
from deposits or from the payment of high 
grade commercial paper. Therefore, anyone 
studying these conditions, should note two 
things : 

(i) Whether the proportion of ''Loans" to 
"Resources" is increasing, decreasing, or re- 
maining fixed. 

(2) Whether the proportion of ''Invest- 
m.ents" to ''Resources" is increasing, decreas- 
ing, or remaining fixed. 

Although the most careful students consider 
these terms separately, we think it is generally 
safe to combine the two ideas in the one general 
rule, as follows: 

As the ratio of ''Loans and 'Investments'' to 
''Aggregate Resources'' increases, the^ banking 
situation becomes more critical; and as the ratio of 
the two combined items to "Aggregate Resources" 
decreases, the banking situation improves. 



17 S BUSINESS BAROMETERS 

The accompanying tables show the record 
of the national banks, state and private banks 
and trust companies of the United States re- 
porting to the Comptroller between 1865 and 
1909. 

A study of the accompanying tables in con- 
nection with the other subjects, makes it possible 
to forecast every period of depression and every 
period of prosperity which this country has ex- 
perienced since the Civil War. These figures 
cannot be expected to foretell the exact time 
when crises or panics will occur, owing to sud- 
den catastrophes such as earthquakes, wars, as- 
sassinations, etc., but they invariably forecast the 
large swings. They clearly show when condi- 
tions are becoming abnormal and the pendulum 
is swinging too far from the perpendicular. 
These figures date back only to the Civil War, 
as the system of national banks was not estab- 
lished until 1863. Consequently this is the only 
period which gives satisfactory data to form a 
basis for any theory regarding the relation of 
banking conditions to general business, and 
conversely, the eiTect of business conditions upon 
banking conditions. The latter clause is added, 
for although a strained condition of the bank 
causes a recession in the general business, it 



Date 


Banks i 


1865 


i.c 


1866 


2,2 


1867 


2,2 


1868 


2,2 


1 869 


2,3 


1870 


2,4 


1871 


2.7 


1872 


3.C 


%i873 


i,c 


1874 


1,9 


1875 


3,3 


1876 


3,4 


1877 


3,3 


1878 


3,2 


1879 


3,3 


1880 


3,3 


1881 


3,4 


1882 


3,5 


1883 


3,^ 


.1884 


4.1 


1885 


4,3 


1886 


4,3 


1887 


6,1 


1888 


6.6! 


1889 


7,21 


1890 


7,9 


1891 


8.6z 


1892 


9,3i 


-1893 


9,4* 


1894 


9,5« 


1895 


9.8 


1896 


9,4< 


1897 


9,4| 


1898 


9,4^ 


1899 


9.7; 


1900 


10,3^ 


1901 


11.4^ 


1902 


12,4: 


•1903 


13.6 


1904 


14.8 


1905 


16,4 


1906 


17,9 


•1907 


19,7 


1908 


21,2. 


b 


Number 



Date 


Banks reporting 


Loans 


Resources 


Ratio of loans 
to Resources 


Ratio 
Loans and of loans and 
Investments Inv. to Res. 


1865 


1,960 


362,400,000 


1,126,500,000 


32.17 


766,700,000 


68.06 


1866 


2,267 


550,400,000 


1,476,400,000 


37-27 


1,015,600,000 


68 


7^ 


1867 


2,279 


588,500,000 


1,494.100,000 


39.38 


1,031,600,000 


69 


04 


1868 


2,293 


655,700,000 


1,572,200,000 


41.70 


1,096,200,000 


69 


73 


1869 


2,354 


686,300,000 


1,564,200,000 


43-94 


1,100,900,000 


70 


38 


1870 


2,457 


719,300,000 


1,510,700,000 


47.61 


1,125,400,000 


74 


49 


187I 


2,796 


789,400,000 


1,730,600,000 


45.61 


1,209,300,000 


69 


88 


1872 


3,066 


871,500,000 


1,770,800,000 


49.21 


1,302,700,000 


73 


57 


»i873 


1,968b 


1,439,900,000 


2,731,300,000 


52.71 


2,153,100,000 


78 


83 


1874 


1,983b 


1,564,500,000 


2,890,400,000 


5413 


2,287,700,000 


79 


15 


1875 


3.336 


1,748,100,000 


3,204,600,000 


54-55 


2,541,200,000 


79 


29 


1876 


3.448 


1,727,100,000 


3,183,100,000 


53-94 


2,534,400,000 


79 


62 


1877 


3.384 


1,720,900,000 


3,204,100,000 


53.68 


2,562,100,000 


79 


96 


1878 


3.229 


1,561,200,000 


3,080,600,000 


50.68 


2,427,100,000 


78 


78 


1879 


3.335 


1,507,400,000 


3,212,600,000 


46.92 


2,539,300,000 


79 


04 


1880 


3,355 


1,662,100,000 


3,399,000,000 


48.90 


2,562,700,000 


73 


39 


1881 


3.427 


1,901,900,000 


3,869,100,000 


49.16 


2,902,800,000 


75 


02 


1882 


3.572 


2,050,300,000 


4,031,100,000 


50.86 


3,099,400,000 


76 


88 


1883 


3.835 


2,233,600,000 


4,208,000,000 


53-08 


3,084,800,000 


73 


31 


.1884 


4,111 


2,260,700,000 


4,221,300,000 


53.55 


3,291,100,000 


77 


96 


1885 


4.350 


2,272,300,000 


4,426,900,000 


51-33 


3,224,300,000 


72 


83 


1886 


4.378 


2,456,700,000 


4,521,500,000 


54-33 


3,487,800,000 


77 


13 


1887 


6,179 


2,944,900,000 


5,203,700,000 


56.59 


3,944,800,000 


75 


80 


1888 


6,647 


3,161,100,000 


5,470,400,000 


57-78 


4,273,200,000 


78 


II 


1889 


7.203 


3,475,200,000 


5,940,900,000 


58.49 


4,587,100,000 


77 


21 


1890 


7.999 


3,842,100,000 


6,343,000,000 


60.57 


5,000,100,000 


78 


83 


1891 


8,641 


3,965,900,000 


6,562,100,000 


60.44 


5,008,400,000 


76 


32 


1892 


9.338 


4,336,600,000 


7,245,300,000 


59-85 


5,606,000,000 


77 


37 


.1893 


9.492 


4,368,600,000 


7,192,300,000 


60.74 


5,722,700,000 


79 


56 


1894 


9,508 


4,085,000,000 


7,290,600,000 


56.03 


5,530,300,000 


75 


85 


1895 


9,818 


4,268,800,000 


7,609,600,000 


56.09 


5,834,000,000 


76 


66 


1896 


9,469 


4,251,100,000 


7,533,900,000 


56 . 28 


5,925,500,000 


78 


44 


1897 


9.457 


4,216,000,000 


7,822,100,000 


53.89 


5,948,300,000 


76 


04 


1898 


9.485 


4,652,200,000 


8,609,000,000 


54 • 04 


6,511,900,000 


75 


64 


1899 


9.732 


5,177.600,000 


9,904,900,000 


52.27 


7,356,600,000 


74 


26 


1900 


10,382 


5.657,500,000 


10,785,900,000 


52.45 


8,055,800,000 


74 


69 


IQOI 


11,406 


6,425,200,000 


12,357,500,000 


52 . 00 


9,246,400,000 


74 


82 


1902 


12,424 


7,189,000,000 


13,363,900,000 


53.80 


10,228,400,000 


76 


54 


•1903 


13.684 


7.738,900,000 


14,303,100,000 


54 II 


11,139,000,000 


77 


87 


1904 


14,830 


7,982,000,000 


15,198,800,000 


52.52 


11,636,200,000 


76 


56 


1905 
1906 


16,410 


9,027,200,000 


16,918,200,000 


53-36 


13,015,100,000 


76 


91 


17.905 


9.893.700,000 


18,147,600,000 


54 52 


13,967,200,000 


76 


96 


•1907 
1908 

b 


19,746 


10,763,900,000 


19,645,000,000 


54-79 


15,141,000,000 


77 


07 


21,246 10,438,000,000 19,583,400,000 
_Wurnber^of national banks only, number of state, etc., not 


52.27 
reported. 


14,883,900,000 


76,00 



liOANS OF THE BANKS 179 

has always been great activity in business that 
has caused critical banking conditions. 

Therefore, when business has been very ac- 
tive and the country very prosperous, bankers 
may surely anticipate strained and critical bank- 
ing conditions. Conversely, when strained 
banking conditions have existed for a certain 
period, business men may be sure of a reaction. 
The figures show that after a period during 
which there was a more or less noticeably rapid 
increase in the ratio of ''Loans and Investments" 
to ^'Resources," there followed invariably a period 
of depression until the ratio was reduced to a 
normal point. From 1887 to 1897 the "Loans 
and Discounts" increased only 43% and the "In- 
vestments" 73% against an increase in aggregate 
resources of 50%. This was a normal and 
healthy increase and all observers were sure that 
the countr}^ was preparing for a period of 
marked prosperity, but between 1897 and 1907 
the "Loans and Discounts" increased 236% and 
the "Investments" 307% against the increase in 
^'Resources" of 248%. It was due to these fig- 
ures that the bankers and investors who care- 
fully study all Fundamental Statistics were sure 
that the country had entered a period of decline. 
Such figures showed a period of depression to 
be absolutely necessary in order to give the banks 



180 BUSINESS BAROMETERS 

an opportunity to recuperate and again enjoy 
healthy and normal conditions. These figures 
are still more dangerous when it is considered 
that during the period between 1887 and 1897 
the aggregate ''Resources" showed an increase 
of 50%, even although the market value of se- 
curities was continually decreasing. During the 
ten years between 1897 and 1907 this increase 
in aggregate "Resources" was largely due to 
the inflated prices and the growing . market val- 
ue of securities held and possibly not at all to 
larger numbers of investments. These changes, 
it is true, have been irregular rather than con- 
stant and have cause'd varying conditions of 
strength and weakness in the banking situation, 
but the figures plainly indicate that in 1906 
banks were in a very weak condition with their 
investments over-extended. The above figures 
would appear somewhat different if figures of 
all private banking houses, such as J. P. Mor- 
gan & Co., Kuhn, Loeb & Co., and others were 
included, but nevertheless they are sufficient. 

Referring to earlier years, we see that in 1873 
the ratio of "Loans" to "Resources" first ex- 
ceeded 50% and in fact reached a ratio of 52.72%. 
Consequently a panic occurred in that year, 
although the ratio of "Loans" to "Resources" 
continued to increase to 54.13% and 54.55% in 



LOANS OF THE BAXKS 181 

1874 and 1875 respectively, and the prolonged 
depression was probably due to this continued 
increase. IMoreover, this item remained practi- 
cally unchanged until 1879 when the liquida- 
tion was completed. ''Loans and Discounts" 
which in 1873 were $1,439,900,000 after reach- 
ing $1,748,100,000 in 1875, were reduced in 
1879 to $1,507,400,000. This condition of the 
banks enabled them to loan money at low rates 
of interest and again accommodate legitimate 
enterprises. Consequently, business increased 
marvellously from 1879 to 1883. 

During this period, however, loans had again 
rapidly advanced, — as is shown by the table, — 
and remained practically fixed between 1883 and 
1885. During this period, that is in 1884, ^ 
sharp panic occurred which might readily have 
been anticipated. Although short in comparison 
with the crisis of 1873, distress was felt in every 
part of the United States. However, the banks 
v/ere able to reduce quickly their ratio of "Loans 
and Investments" to "Resources" so that the ra- 
tio which stood at 77.96 in 1884 was reduced to 
72.83 in 1885. Consequently, business became 
again more active, mills resumed operation and 
railroad earnings began to increase. 

In 1886 the new period of prosperity, with 
advancing prices, was in full swing. This move- 



182 BUSINESS BAROMETERS 

nient continued without any marked change 
until the early 'nineties when "Loans'" reached 
a very high proportion, 6o.57rc. Large crops 
in this countr}% with small crops abroad, helped 
to postpone trouble for a time, but a depression 
came in 1893 ^vhen the ratio of ''Loans'' to ''Re- 
sources was even higher than in 1890, namely 
60.74^"^. All business men and investors who 
were studying these figures were absolutely sure 
that a panic v\-ould ensue. 

Another disturbance came in 1903 which, 
although short, was certainly severe. Railroad 
earnings decreased, mills shut dovvUi, many men 
were thrown out of employment and money 
rates were very high. Again the western farm- 
er came to the rescue of the country and, owing 
to bountiful crops and strong underlying condi- 
tions, mills again started and business improved. 
This continued until 1907. During these years, 
however, there was no real improvement in the 
banking situation except for a short time. In 
1904 money was very cheap, but only temporar- 
ily. The banking conditions became worse and 
worse so that students of the situation were 
sure that the improvement in 1904 to 1907 would 
be followed by a depression, but during which 
time the banks might again have an opporttmity 
to recuDerate. 



LOANS OF THE BANKS . 183 

The great value of this data to the investor is 
self-evident. When the ratio of ''Loans and 
Investments" to ''Resources" is abnormally high, 
the country is abounding in prosperity and se- 
curities are selling at high prices, the wise in- 
vestor sells his securities and places his money 
on deposit in strong banks. On the other hand, 
when the ratio of "Loans and Livestments" to 
"Resources" is low, and when, although busi- 
ness is dull and mills are not running, his gen- 
eral knowledge of the situation shows that con- 
ditions are sound and healthy, the investor will 
withdraw his money from the banks, pur- 
chase high grade stocks and bonds and hold 
them until business again becomes active. 

^loreover, while in the tables we have given, 
aggregate figures for all banks, compiled in order 
to show general banking conditions, they are of 
service in comparing the condition of two or 
more banks. Every depositor should select a 
bank whose ratio of "Loans" to "Resources" is 
comparatively small and should especially avoid 
banks with large "Investment" accounts,- — so 
large as to show a policy not in agreement with 
sound management. 

In the weekly New York Bank Statement, 
the meaning of "Loans" is self-evident. A very 
small figure for "Loans" is not a good sign, 



184 BUSINESS BAROIVIETERS 

neither is a very large figure. Tlie former signi- 
fies stagnation, the latter, over-extension. It 
is important that the figure be normal, and that 
it bear a proper relation to the figure for "De- 
posits," — thus giving a sound, safe amount for 
"Surplus Reserve.'' 

The following conclusions regarding the ratio 
of ''Loans" to "/Iggregate Resources" are sug- 
gested. The same principles apply to the ratio 
of "Loans and Investments" to Aggregate Re- 
sources." 

1. During a Period of Business Depression. 

(a) An increase in the ratio signifies re- 
newed activity. 

(b) A decrease signifies a further recession 
in business. 

(c) No change signifies continued dullness- 

2. During a Period of Improvement following 

a Period of Business Depression 

(a) An increase in the ratio signifies in- 
creased activity. 

(b) A decrease signifies a temporary reces- 
sion. 

(c) No change calls for special watchfulness. 

3. During a Period of Prosperity. 

(a) An increase in the ratio signifies un- 
derlying troubles and forecasts a change in con- 
ditions. 



CASH IX THE BANKS 185 

(b) A decrease tends to prolong the period 
of prosperity. 

(c) No change also tends to prolong this 
period. 

4. During a Period of Decline follozving a Per- 
iod of Prosperity 

(a) An increase in the ratio signifies further 
trouble. 

(b) A decrease tends to delay bad condi- 
tions. 

(c) No change calls for special watchful- 
ness. 

Cash in the Banks 

This subject may be considered in two ways: 

(c) Ratio of the "Cash" in the banks to the 
"Deposits." 

(d) Ratio of the "Cash" in the banks to the 
"Resources." 

In reality these are two entirely different 
subjects, as the "Deposits" of a bank are liabil- 
ities while its "Resources" are assets. Therefore, 
in the one case we consider the ratio of "Cash" 
to liabilities; in the other, the relation of "Cash" 
to the assets. It is therefore absolutely neces- 
sary for the student of "Fundamental Statistics" 
to examine thoroughly the condition of the 
banks in relation to both points. It has hap- 
pened during the past forty years that the ratio 



186 BUSINESS BAROMETERS 

of ''Cash" to ''Resources" has varied almost 
constantly with the ratio of "Cash" to "Depos- 
its," but before considering the two subjects 
together, one should first note if their progress 
is still along parallel lines. 

Having already explained the relation that 
"Loans and Investments" bear to the money sit- 
uation, let us study the effect that "Cash" has on 
the m.oney situation. Of course it is usually true 
that the greater the amount of "Loans and In- 
vestments," the smaller the amount of "Cash," 
and vice versa. For this reason the following 
rules are already self-evident. 

I. The hanking situation grows more critical 
as the ratio of cash to deposits decreases, and 
the situation improves as the ratio of cash to 
deposits increases. 

National banks are compelled by law to main- 
tain an actual reserve equal to twenty-five per 
cent of their deposits and any amount over this 
reserve is called the "Surplus Reserve." As 
this "surplus reserve" declines, money rates in- 
crease, merchants and manufacturers are limited 
in borrowing, and speculators are compelled to 
dispose of stocks and bonds in order to pay 
their loans. On the contrary, as the "surplus re- 
serve" decreases, the banks are in a much bet- 
ter condition and are ready to loan money to 



CASH IN THE BANKS 187 

investors, manufacturers and merchants at low- 
er rates of interest. All of this, however, is 
explained in detail in an article on the New 
York Bank Statements a few pages hence. 

Periods of depression and periods of prosper- 
ity in the past always could have been antici- 
pated by including in every survey of passing 
conditions, a study of the ratio of "Cash" to 
''Deposits." Whenever there has been a decline 
in the ratio of cash to deposits or aggregate re- 
sources, there has always followed a period of 
contraction of credits ; and conversely as this 
ratio increased, lower interest rates have always 
followed. The follow^ing table shows the ratio 
of cash to the deposits of the National, State, 
Savings and other banks and trust companies 
from 1865 to and including June 30, 1908. 

THE RATIO OF CASH TO NET DEPOSITS IN 
NATIONAL BANKS. 











Ratio of 


Year 


No. of banks 


Individual 


Total cash in 


cash to 




Reporting 


Deposits. 


Banks. 


Individual 
deposits 


1865 


1,960 


$641,000,000 


$199,400,000 


31. II 


1866 


2,267 


815,800,000 


231,900,000 


28.30 


1867 


2,279 


876,600,000 


205,600,000 


23-45 


1868 


2,293 


968,600,000 


200,700,000 


20.72 


1869 


2,354 


1,032,000,000 


162,500,000 


15 -74 


1870 


2,457 


1,051,300,000 


187,700,000 


17.85 



188 BUSINESS BAROMETERS 



I87I 


2,796 


1,251,600,000 


194,000,000 


15-5 


1872 


3,066 


1,353,800,000 


177,600,000 


13.12 


1873 


1,968 


1,421,200,000 


218,200,000 


15-35 


1874 


1,983 


1,526,500,000 


252,200,000 


16.52 


1875 


3,336 


1,787,000,000 


238,700,000 


13-36 


1876 


3448 


1,778,600,000 


226,400,000 


12.73 


1877 


3,384 


1,813,600,000 


230,500,000 


12.71 


1878 


3,229 


1,717,400,000 


214,600,000 


12.50 


1879 


3,335 


1,694,200,000 


216,300,000 


12.77 


1880 


3,355 


1,951,600,000 


285,500,000 


14.63 


I88I 


3,427 


2,296,800,000 


295,000,000 


12.84 


1882 


3,572 


2,460,100,000 


287,100,000 


11.65 


1883 


3,835 


2,568,400,000 


321,000,000 


12.50 


1884 


4,111 


2,566,400,000 


321,200,000 


12.51 


1885 


4,350 


2,734,300,000 


414,300,000 


1515 


1886 


4,378 


2,812,000,000 


375,500,000 


13.00 


1887 


6,179 


3,308,200,000 


432,800,000 


13.09 


1888 


6,647 


3,422,700,000 


446,100,000 


13 03 


1889 


7,203 


3,778,100,000 


499,100,000 


13.21 


1890 


7,999 


4,062,500,000 


478,300,000 


11.77 


I89I 


8,641 


4,796,800.000 


479,100,000 


II. 41 


1892 


9,338 


4,664,900,000 


568,400,000 


12.58 


1893 


9,492 


4,627,300,000 


515,900,000 


II. 15 


1894 


9,508 


4,651,200,000 


688,900,000 


14.81 


1895 


9,818 


4,921,300,000 


631,100,000 


12.82 


1896 


9,469 


4,945,100,000 


531,800,000 


10.84 


1897 


9,457 


5,094,700,000 


628,200,000 


12.33 


1898 


9,485 


5,688,200,000 


687,800,000 


12.09 


1899 


9,732 


6,768,700,000 


723,300,000 


10.69 


1900 


10,382 


7,238,900,000 


749,900,000 


10.36 


I90I 


11,406 


8,460,600,000 


807,500,000 


9.54 


1902 


12,424 


9.104,700,000 


848,100,000 


9.31 


1903 


13,684 


9,553,600,000 


857,200,000 


8.97 



CASH IN THE BANKS 189 



1904 


14,850 


10,000,500,000 


990,600,000 


9.90 


1905 


16,410 


11,350,700,000 


994,100,000 


8.76 


1906 


17,905 


12,215,800,000 


1,016,400,000 


8.32 


1907 


19,746 


13,099,600,000 


1,113,700,000 


8.51 


1908 


21,346 


12,584,511,169 


1,368,300,000 


10,70 



It is very interesting to note that the ratio 
of "Cash" to ''Deposits" decreased in 1891 to 
practically the lowest figure known up to that 
time and in 1893 to a still smaller figure, mak- 
ing the panic of 1893. ^^s in the case of all pan- 
ics, this resulted in the calling of loans and the 
immediate strengthening by the banks of their 
cash resources, so that in 1894 this ratio had in- 
creased more than 32%. In the following 
year the ratio again dropped 13%. From 1897 
it continued to fall until the next very low point 
reported for the year ending June 30, 1903. At 
that time, experts in these matters publicly pro- 
phesied a panic followed by a period of de- 
pression and, true enough, the following year 
it came, — the panic of 1903. ''Resources" in 
1904 were strengthened somewhat, but the im- 
provement was not enough to restore the banks 
to a healthy and normal condition. In fact, the 
ratio was very low from 1904 to 1907, so that, 
instead of the customary number of years of 
prosperity before another depression, the coun- 
try saw a change for the worse in 1907. If the 
depression of 1903 had lasted long enough to 



190 BUSINESS BAROMETERS 

enable the banks sufficiently to increase their 
cash resources, improvement would probably 
have gone on until 1912 or 1913; but as the 
banks did not have time to recuperate, another 
depression within a few years was inevitable. 
The figures in this table are for the entire coun- 
try, and a study of them is very suggestive. As 
they in general are similar to those outlined in 
the paragraphs on ''Loans," they need not be de- 
scribed further here. When studying the ratio 
of "Cash" to "Deposits," one must not only note 
this ratio, but must also keep in mind the aggre- 
gate of cash and the aggregate of deposits 

The following conclusions relative to the ra- 
tio of "Cash" to "Deposits" are suggested: 

(These general principles also apply to 
the ratio of "Cash" to "Aggregate Resources.") 
I. During a Period of Business Depression. 

(a) After money has been cheap for some 
tim.e, accompanied by large cash figures, a con- 
tinued increase in the ratio of "Cash" to "De- 
posits" signifies that business remains at a 
standstill. 

(b) A decrease — under the above conditions 
— may be a good sign, showing that business is 
reviving. 

(c) No change signifies that conditions are 
stationary. 



CASH IX THE BANKS 191 

2. During a Period of Improvement folloiving 

a Period of Business Depression. 

(a) After money rates have been very low 
for sometime, a farther increase in the ratio of 
"Cash" to ^'Deposits" often means that there 
has been a recession in business. 

(b) A decrease under such conditions usually 
signifies renewed activity. 

(c) No change signifies a period of hesita- 
tion. 

3. During a Period of Prosperity. 

(a) An increase in the ratio of "Cash" to 
"Deposits" tends to prolong the period of pros- 
perity. 

(b) A decrease tends to shorten the period 
of prosperity. 

(c) No change signifies a period of hesita- 
tion. 

4. Dnring a Period of Decline following a Per- 

iod of Prosperity- 

(a) An increase in the ratio of "Cash" tends 
to delay the depression. 

(b) A decrease hastens the period of tight 
money and unsatisfactory conditions. 

(c) No change signifies nothing of import- 
ance. 

Deposits of the Banks 
The rule governing the ratio of "Cash" to 
"Deposits" holds good, except when deposits are 



192 BUSIXESS BAR03IETERS 

increasing too rapidly, owing to increased prices 
of securities, real estate and commodities. Be- 
side studying the ratio as we have described, 
the deposits should be watched especially for in- 
creases. The weekly statement of the New York 
banks will serve this purpose, although the fact 
that the reserve exceeds the deposits is not suf- 
ficient for safety. Deposits should not increase 
too rapidly. 

A very simple illustration shows how large de- 
posits may be reported at considerable risk, but 
without any intentional mis-statements of facts. 

A few years ago a miser died in a certain 
town which may be called Graniteville. The 
executor of his estate found $5,000 in gold stored 
away in the house, and deposited it with the 
Graniteville Trust Company, thereby increasing 
the deposits of that company by $5,000. Shortly 
after, John Smith borrows $4,500 of the amount 
in order to buy stone with which to build 
a block of buildings. The local granite company, 
having outside income sufficient to pay its ex- 
penses, deposited the entire $4,500 received from 
Smith vs-ith the Graniteville Trust Company, so 
the deposits of the trust company became $9,500. 
Soon after ^Ir. Jones came into the bank and 
borrowed $4,200 with which to bu}'' stone to 
build a block in another part of the town, and 



DEPOSITS OF THE BANKS 193 

Upon receipt of Jones' $4,200, the granite com- 
pany made another deposit with the trust com- 
pany increasing the deposits to $13,700. 

The following day a Mr. Brown, by means of 
a loan from the bank bought stone, and the 
granite company increased its deposits to $17,- 
500. This same m^ethod of procedure was fol- 
lowed further until the $5,000 in gold which 
was originally deposited resulted in increasing 
the deposits of the trust company by $50,000 
and the loans by $45,000. Moreover, this $5,000 
enabled the granite company to suppose it had 
$45,000 in cash on deposit in the bank and also 
provided for the building of several stone blocks 
in the city. In other words, the deposit of this 
$5,000 in gold resulted in creating an apparent 
wealth in Graniteville of over $100,000. This 
story also shows the great importance of import- 
ing gold and of giving the banks the use of as 
much actual currenc}^ as possible. 

When the miser's estate was settled, this 
$5,000 was turned over to his only daughter, 
who had the same hoarding disposition as her 
father. She immediately withdrew the $5,000 
from the Graniteville Trust Company and placed 
the same in a safe-deposit box with the follow- 
ing result. 

The Graniteville Trust Company, in order to 
show its proper Surplus Reserve was obliged to 



194 BUSINESS BAROIVIETERS 

demand payment of all the loans made to Smith, 
Jones, Brown, and the other men. In order to 
pay these loans, all of these men were obliged 
to sell the buildings which they had erected and, 
in order to protect the price of granite, the 
granite company was obliged to purchase these 
buildings, which necessitated the withdrawal of 
their deposits from the trust company. Thus 
the withdrawal of this $5,000 in gold resulted 
in decreasing the deposits of said trust company 
$50,000, in causing the $45,000 of cash assets of 
the granite company to vanish, and in causing 
the half dozen or more citizens to lose their 
property, and possibly enter bankruptcy. 

The principle should be clearly kept in mind 
when studying the "Deposit" item of the New 
York Bank Statement. Large "Deposits" are 
not necessarily a healthy sign. Neither very 
larg'e or very small "Deposits" are normal. The 
best bank statement is the one where the figures 
for "Deposits" are normal, and bear a proper 
relation to "Loans." thus showing a proper 
"^'Surplus Reserve." 

The exact meaning of these various terms as 
used in the above-mentioned Bank Statement 
(which is issued every Saturday at eleven in 
the morning, showing the condition at the close 
of business on Friday) is as follows, according 



DEPOSITS OF THE BANKS 195 

to a valuable pamphlet published by Sig. Ro- 
senblatt & Co: 
''Loans and Discounts'. 

Comprising loans, discounts, stocks, bonds 
and mortgages owned by the bank- 
Specie : 

Comprising gold and silver coin, United 
States and Clearing House certificates, and 
United States silver certificates. 
Legal Tender Notes: 

Comprising United States legal tender notes 
of all issues. 
Circtdation : 

The amount outstanding. 
Deposits : 

Gross deposits and unpaid dividends less ex- 
changes for the clearing house, amounts due 
from other banks for collection, notes of other 
banks and checks on non-clearing institutions 
in the city of New York. 

The item of loans and discounts, it vv^ill be no- 
ticed, represents, aside from notes, drafts or any 
instrument upon which funds have been loaned 
out by the bank, also United States bonds held 
by the national bank as security for circulation 
and for deposits of public money, and the stocks, 
bonds, mortgages, and syndicate investments of 
both state and national banks. Therefore, 
changes in circulation may very often appear 



196 BUSINESS BAROMETERS 

also as a change in loans, since purchases by the 
banks of bonds always increase the loans, and 
sales of bonds decrease the loan account, if the 
proceeds are not loaned out. 

It must be kept clearly in mind that all items 
of the weekly statement are made up by aver- 
ages. There are two ways to make up these av- 
erages, but neither one gives a clear picture of 
the condition of the bank: one way is to add 
the figures at the close of each day's business 
and divide the total by the number of business 
days in the week. Another way is to multiply 
each of the first day's items by the number of 
business days in the week, and each subsequent 
day's items by one less, and then add them and 
divide the total by 21 for a six-day week and by 
15 for a five-day week. As both of these ways 
are more or less inaccurate, the changes shown 
by the bank statement seldom agree with the 
changes indicated by the reported movement of 
money. 

The surplus against all deposits is computed 
by subtracting one-quarter of the net deposits 
from the cash held. This has to be done, as the 
banks are required by law to keep a reserve of 
25% against their deposits. This is true so far 
as it concerns the total surplus. The surplus 
against deposits other than the United States 



DEPOSITS OF THE BANKS 197 

deposits is computed by deducting from a quar- 
ter of the total deposits 25% of the UnitedStates 
deposits and subtracting the remainder from the 
cash held. 

x\s an example, take the New York Clearing 
House Statement for the week ending Friday, 
February 15, 1908, 48 banks reporting: 
Total capital of all institutions. . . .$ 124,350,000 

Net profits of all institutions 159,561,100 

Loans average 1,135,248,200 

Specie average 253,424,200 

Legal tender average 60,503,300 

"^Deposits average 1,132,309,100 

Circulation average 66,723,500 

*L^nited States deposits includ- 
ed $59495.300 

In order to find out the sur- 
plus reserve against all deposits, 
compute on the net deposits 

amounting to $1,132,309,100 

25%, equal to 283,077,275 

The actual reserve, consisting of 
legal tenders and specie as above 

amounts to $313,927,500 

Less the reserve required 283,077,275 

Leaving a surplus of 30,850,225 

To find the surplus against de- 
posits other than United States 



198 BUSINESS BAR031ETERS 

deposits, take the total deposits 

of $1,132,309,100 

Deduct U. S. deposits of 59,495..300 

Leaving net deposits of [,072,813,800 

255^ reserve required 268,203,450 

Reserve held 313,927,500 

Surplus S 45.724.050 

Percentage of reserve held by banks was 
27.72% (25% required, and surplus above that 
amounting to $45,724,050). 

The above shows how the bank statement ap- 
peared formerly. The question immediately 
arises whether the statement issued by the banks 
comprising the clearing house, together with the 
non-members statement, would give an actual 
picture of the banking power of New York City. 
The answer is no, inasmuch as the trust com- 
panies are not included in the statement. How- 
ever, it is now possible to acquire a comprehen- 
sive knowledge of banking conditions in Greater 
New York because of the publication of the ac- 
tual as well as the average condition of the Clear- 
ing House banks, and the compilation under di- 
rection of the State Superintendent of Banks of 
the average institutions under his control, not 
reporting to the Clearing House. These state- 
ments are: 

1st. Clearing House members average 
statement. 



DEPOSITS OF THE BANKS 199 ^ 

2nd. Clearing House members actual 
statement. 

3rd. Average of other banks and trust com- 
panies not in the Clearing House. 

4th. Aggregate average. 

In order to make the compilation still clearer, 
the Superintendent issues a separate summary of 
weekly statements of all state banks and trust 
companies. 

It m.ust be borne in mind that the percentage 
of reserve of Clearing House banks represents 
actual cash in bank, while only 5% of cash is re- 
quired of trust companies, the remainder being 
either certain bonds, or deposits in other insti- 
tutions. 

In spite of there still being some weak points 
in the compilation of the statement, as, for in- 
stance, that the averages are not figured in the 
same way by all institutions, and also that in the 
item ''Loans and Discounts" there are included 
investments, such as stocks, bonds and mort- 
gages which, in fact, should not be included in 
the loan item, we may be very well satisfied 
with the statement as now issued- It is highly 
to be appreciated that our banks and trust com- 
panies have so readily acceeded to the demands 
of the public." 

The following conclusions relative to Bank 
Deposits are suggested: 



200 BUSIXESS BAROMETERS 

1. During a Period of Business Depression. 

(a) An increase signifies that business is 
improving. 

(b) A decrease signifies that business is not 
improving. 

(c) No change signifies continued dullness. 

2. During a Period of Improvement Following 

a Period of Business Depression 

(a) An increase signifies renewed activity. 

(b) A decrease signifies a temporary re- 
cession. 

(c) No change signifies "uncertainty." 

3. During a Period of Prosperity. 

(a) A large increase signifies that under- 
lying conditions are becoming unsound. 

(b) A decrease calls for caution. 

(c) No change signifies no change in the 
situation. 

4. During a Period of Decline following a Per- 

iod of Prosperity 

(a) An increase tends to prolong the period 
of prosperity. 

(b) A decrease tends to hasten the coming 
period of depression. 

(c) No change calls for special watchful- 
ness. 

Surplus Reserves of the Banks 
The figure for "Surplus Reserve" as given in 
the New York Bank Statement always indicates : 



SURPLUS RESERVES OF THE BANKS 201 

(a) The Price of Money. 

(b) The Supply of INIoney. 

The price is determined by the relation of the 
supply and the demand ; that is, when more per- 
sons wish to borrow than to loan, the interest- 
rates advance; and when a larger number wish 
to loan than to borrow, the supply is greater 
than the demand and the interest-rates decline. 
For this reason money-rates are usually high 
during the periods of business activity and low 
during periods of depression. The price of mon- 
ey, however, is not as important a factor as the 
supply. In other words, provided the merchant 
can obtain the money when needed and in suffi- 
cient quantities, an abnormal interest-rate is less 
harmful in its effects than the inability to get 
money at all. 

A variation in the rates for borrowed money 
has a more direct effect upon the market for 
stocks and bonds than upon the market for mer- 
chandise. When the speculator can borrow mon- 
ey at three or four per cent, to purchase securi- 
ties paying five or six per cent., the temptation 
is to borrow and make the purchases, thus in- 
creasing the demand and consequently the mar- 
ket price for the securities. Under such cir- 
cumstances, there is a profit on the "interest ac- 
count," even although there is no increase in 



202 BUSrSESS BAROI^IETERS 

the vab.ie of the investments. On the other hand, 
this increased incentive to purchase does not exist 
when money commands six or seven per cent. 
and securities are selHng on a four or five per 
cent, basis, for then the "interest account" shows 
a loss. Those who have securities upon Vv'hich 
they are borrowing money are tempted to sell 
them in order to stop the loss in interest. Con- 
sequently, the supply of securities exceeds the 
demand and the price declines. As already stat- 
ed above, this question of '"interest rates" is 
entirely secondary to the question of ''supply." 
It is not interest rates that cause the merchant 
to fail or the speculator to sacrifice his stocks, 
but rather the inability of either to renew loans 
on any terms whatever. Many great periods 
of declining prices have been solely due to this 
cause, nam.ely, a lack of supply of money, and 
the speculator is not the only one to feel the 
effect of such times. 

The Xew York Bank Statement, used in con- 
nectioH with the Comptroller's Reports and For- 
eign Money Rates, form.s the best barometer of 
the supply of money. As to the current price of 
money, this may be definitely determined each 
day, by referring to the money articles on the 
financial pages of any daily paper. The figures 
under what is known as "call rates" or "call 



SURPLUS RESERVES OF THE BAXKS 203 

money" denote the rates which the stock ex- 
change houses and bond dealers are required to 
pay for money on loans which may be called 
any day and on which the rates change from 
day to day. Sometimes this figure is more and 
sometimes less than the figure for ''time-rates." 
*'Time-rates" apply to loans maturing at a fixed 
date, such as six months or a year. When the 
bankers loaning money think that all rates are 
to strengthen in the near future, then the call- 
rate is less than the time-rate, and when the 
bankers having money to loan think that all 
rates are to decrease in the immediate future, 
then call-rates are higher than the time-rates. 
Some of the shrewdest borrowers take time 
m.oney when the bankers are encouraging the 
people to take call money, and vice versa, on the 
principle that the bankers know more about the 
situation than their customers. However, this 
question of money rates is too complicated to 
present here in detail, but, as has been stated, 
the price of money can be easily ascertained at 
any moment by referring to the daily papers. 

The supply of money is the most vital ques- 
tion as — unlike the price — it is not so subject to 
manipulation. This supply — as above stated — 
is best indicated by the weekly bank statement. 
This is simply a statement of the New York 



204 BUSINESS BAROMETERS 

banks and does not include statements from any 
of the other twenty thousand banks in the United 
States, nor the great banking institutions of 
foreign countries. The need of a complete 
weekly bank statement is already felt. The New 
York bank statement is already being made to 
include certain outside banks, and without doubt 
the time is coming when all of the large banks 
in this country will report their condition by 
telegraph every Saturday morning, so as to give 
a combined statement. This probably will later 
be followed by the banks of every country re- 
porting their conditions by cable to London. 
This will give a bank statement which will 
show the exact financial situation and enable 
one to note the amount of available money as 
quickly and as certainly as he may now note 
the rate of interest. Until such a time comes, 
however, the New York bank statement, issued 
every Saturday noon, is the best barometer we 
have for judging the conditions. 

In reading the bank statement the main point 
to note is the amount of "Surplus Reserve." For 
although every national bank is obliged to re- 
serve a certain amount, the private banks and 
trust companies are not under the same law, but 
without doubt the public will, in time, demand 
laws compelling all to carry the same reserve. 



STTBPLrS RESEin-ES OF THE BANKS 205 

In this bank statement appears the item "Re- 
serve required" and either directly above or di- 
rectly following this item is also the item, "Re- 
serve held." It always should be observed 
whether the "Reserve held" is greater or less 
than the "Reserve required." If the ."Reserve 
held" is greater, then there is a "Surplus Re- 
serve," but if not, then there is a "Deficit," which 
is a danger signal to all interested in financial 
or mercantile affairs. Since a "Deficit" occurs, 
as a rule, only just preceding times of panic, 
possibly for a few weeks out of two or three 
years, the merchant should notice each week, 
as he reads the bank statement, whether or not 
the "Surplus Reserve" is decreasing or increas- 
ing. 

So long as the "Surplus Reserve" decreases, a 
corresponding increase in money rates may be 
expected; but if it increases each v/eek, a de- 
crease in money-rates may follow. Since the de- 
mand for stocks usually increases as the interest 
rate decreases, the stock market usually strength- 
ens and the money-rates decline with the publica- 
tion of what is known as a "good bank statement," 
namely, a bank statement which shows an in- 
crease in the "Surplus Reserve." On the other 
hand, as an increase in money rates usually 
forces a sale of stocks, due to the calling of the 



206 BUSINESS BAROMETERS 

loans, a ''poor bank statement" is often followed 
by a drop in the market prices. When the bank 
statement is published on Saturday, the increase 
in interest rates cannot come until the following 
Monday, or possibly later, but the speculator 
anticipates this by selling on Saturday immedi- 
ately upon the publication of a poor statement- 
The first sellers after a poor bank statement are 
supposed to obtain the best prices, and the first 
buyers after a good bank statement are supposed 
to obtain their securities at the lowest prices. 

The meaning of the word "surplus" implies a 
difference between two other items ; thus an in- 
crease in surplus may be due either to a decrease 
in one of the items, or to an increase in the other. 
The best bank statement is the one where the in- 
crease in "surplus reserve" is due to a reduction 
in "loans with increased deposits." 

All merchants should keep a monthly record 
of the ''Surplus Reserve" as per the first day 
of each month, although a plot is not necessary. 

The following conclusions are suggested rel- 
ative to the "Surplus Reser^^e." 
I. During a Period of Business Depression. 

(a) An increase signifies lower m.oney rates 
but continued dullness. 

(b) A decrease signifies higher money rates 
but improved conditions. 

(c) No change signifies continued dullness. 



SURPIiUS KESERVES OF THE BANKS 207 

2. During a Period of Improvement following 

a Period of Business Depression. 

(a) An increase signifies that the recovery 
in business is not very marked, and that con- 
tinued low money rates may be expected. 

(b) A decrease is always the forerunner of 
higher money rates. 

(c) No change is the most favorable sign. 

3. During a Period of Prosperity. 

(a) An increase signifies that prosperous 
conditions may be expected to continue, with 
no change in money rates. 

(b) A decrease is often a ! danger signal 
and is always the forerunner of higher money 
rates. 

(c) No change signifies continued prosper- 
ity. 

4. During a Period of Decline follozving a Per- 

iod of Prosperity. 

(a) An increase tends to prolong present 
conditions, and to lower money rates. 

(b) A decrease is a sign that conditions are 
growing worse and that higher money rates may 
be expected. 

(c) No change signifies uncertainty. 

Bank Clearings 
(a) Total Bank Clearings of the United 
States. 



208 BUSTXESS BAROMETERS 

(b) Bank Clearings of the United States 
with the exception of New York City. 

In every large city and many small ones having 
more than two banks there is an institution 
known as a clearing house. Each day at some 
given hour the representatives of all the banks 
in the city or town meet at one of the banks 
and exchange checks drawn on one another. In 
other v/ords, if customers of the Gloucestet 
National Bank deposited during the day $20,000 
in checks drawn on the First National Bank of 
Gloucester and customers of the First National 
Bank deposited checks to the amount of $15,000 
drawn on the Gloucester National Bank, instead 
of the Gloucester National sending a messenger 
to collect the $20,000 from the First National 
and the First National sending a messenger to 
collect the $15,000 from the Gloucester National, 
representatives of both banks meet and exchange 
checks and the First National gives the Glouces- 
ter National a check for $5,000 to balance the 
account. This process of settlement is not of 
great importance in a city having only two or 
three banks, but the average rapidly increases 
as the number of banks increase. In large cities 
such as New York, Chicago, Philadelphia or 
Boston, the clearing house occupies a separate 
building and has regularly salaried employees. 



BANK CLEARINGS 209 

The largest clearing house in this country is 
in New York City; it was established in Octo- 
ber 1858 and passes annually an average of 
over $50,000,000 in the form of checks. In 
all there are about 135 clearing houses or asso- 
ciations in the United States. In other words, 
there are about 135 cities of sufficient impor- 
tance and with a sufficiently large number of 
banks to have clearing houses and to publicly re- 
port their "Clearings." For further particulars 
as to the details of clearings and the business 
of clearing houses refer to Jas. G. Cannon's 
most complete book on the subject, entitled, 
''Clearing Houses," and also to "The Principles 
of J\ioney and Banking" by Conant. For a very 
simple and condensed statement, refer to pages 
80-86, inclusive, of "Money and Investments" by 
Montgomery Rollins. 

Clearings serve as a very good barometer of 
present business conditions and the reason for 
this is as follows : Out of the 20,000 or more 
banks in the United States, about one-third are 
connected with one of the above-mentioned 135 
clearing houses. This means that practically all 0/ 
the checks handled by these thousands of banks, 
pass through some clearing house. Therefore 
by watching the record of the checks "cleared," 
we have an accurate idea of the total business 
transacted by about 7,000 banks. Moreover, 



210 BUSINESS BAROMETERS 

as these 7,000 banks are the largest of the 20,000 
and in fact control about nine-tenths of the 
banking of the United States, these clearing 
house figures indicate the entire banking busi- 
ness of the United States for any given period. 

x\s today practically all payments are made 
by check and all business is carried on through 
the banks, the volume of money handled by the 
banks by check, increases or decreases in con- 
stant ratio with the general business of the coun- 
try. Therefore, as the banks pass their business 
through the clearing houses, a report on bank 
clearings is a very good barometer of present 
husiness conditions. 

Some people make the mistake of assuming 
that by studying clearing house statistics one 
can easily forecast business conditions. A study 
of these statistics is an aid in forecasting busi- 
ness conditions and therefore is one of the fac- 
tors used in making such a forecast, but taken 
by them.selves they are of little value, as they 
refer only to present day conditions. 

Somie critics do not care ^'to know about pres- 
ent conditions, but desire only to forecast future 
-conditions-" This point of view is not logical, 
as a knovrledge of present conditions is a neces- 
sar}' step toward forecasting future conditions. 



BANK CliEARlNGS 211 

Were it not for the systematic reports received 
on bank clearings, the barometer for present 
conditions would be much less valuable. But 
by a study of these clearings, as they are re- 
ported each week, one is in immediate touch 
with existing conditions throughout the coun- 
try and is thus in a position to intelligently fore- 
cast future conditions. In making use of these 
statistics, for such a forecast, two methods are 
used : 

I. The bank clearings are plotted for each 
vreek for a number of past years with a hori- 
zontal scale for weeks and a vertical scale of 
billions. With one half inch to a week this 
makes a plot about thirty inches long. It is cus- 
tomary to have each year under the preceding 
year, which is very easily done, as each plot is 
of the sam.e length, although the angle of fluc- 
tuations is not constant. This gives comparative 
plots for several complete years, directly under 
which appears a plot for the present year up to 
the receipt of the last report on bank clearings. 
This not only gives the merchant a bird's-eye- 
Tiew of the situation for the present year, but 
also an idea of what may be expected at different 
periods of the year. During some per- 
iods of the year poor figures on bank clear- 
ings are not, in reality, as unsatisfactory as if 



212 BUSINESS BAROMETERS 

they had occurred at other seasons, The prin- 
cipal use of this plot however, is to study the 
fluctuations of the last portion of the plotted line 
for the current year. In other words, the busi- 
ness man notes whether the variation of the 
last few months plotted for the current year, 
is upward or downward and also how said var- 
iations compare with similar months of pre- 
vious years, or in other words, with normal fig- 
ures. If the plots for these previous years can 
be combined into one plot for an assumed nor- 
mal year, the work is greatly simplified. This 
may seem a very simple procedure, but if really 
comprehended and carefully studied, it gives 
not only a bird's-eye-view of present conditions. 
but in conjunction with a study of other subjects, 
gives the best possible idea of whether general 
business is becoming better, worse, or simply 
holding its own. 

2. The other method is more mathematical and 
not so readily comprehended. Instead of plot- 
ting the figures for a series of years, merchants 
simply tabulate the totals as follows: 

Bank Clearings of U. S. 
Bank Clearing of U. S. Excepting N. Y. 
Year Total Year Total 

1883 $51,699,823,752 1883 $14,265,522,880 

1884 44,165,125,355 1884 13^179.255,183 



BANK CLEARINGS 2I3 



1885 


41,439,303,599 


1885 


13,287,102,263 


1886 


49,247,681,466 


1886 


15.570351*854 


1887 


51,091,236,324 


1887 


17,616,680,056 


1888 


49,484,584,175 


1888 


18,384,046,654 


1889 


56,110,250,455 


1889 


20,215,145,550 


1890 


60,546,563,997 


1890 


23,087,956,388 


I89I 


56,657,179,617 


I89I 


22,907,857,405 


1892 


61,919,125,622 


1892 


25,256,657,420 


1893 


54,143,527,180 


1893 


22,822,489,378 


1894 


45,460,058,609 


1894 


21,072,251,587 


1895 


53,180,700,764 


1895 


23*338,903,840 


1896 


51,246,323,830 


1896 


22,375*548,783 


1897 


57,229,070,956 


1897 


23,802,043,485 


1898 


68,826,557,324 


1898 


26,854,774,887 


1899 


94,047,400,783 


1899 


33,258,608,882 


1900 


86.070,549,683 


1900 


33.436,347*818 


I90I 


118,410,015,182 


I90I 


38,982,329,340 


1902 


118,023,298,740 


1902 


41,695,109,575 


1903 


109,209,187,164 


1903 


43,238,849,809 


1904 


112,449,664,015 


1904 


43,800,245,342 


1905 


143,872,974,359 


1905 


50,087,388,239 


1906 


157,749,328,913 


1896 


55,132,812,330 


1907 


144,188,663,955 


1907 


57*706,495*574 


1908 


132,272,067,412 


1908 


52,996,187,156 



Column 2 is for the bank clearings of the 
entire United States and Column 4 is for the 
United States zvifh the exception of New York 



214 BUSINESS BAROMETERS 

City. In practice these -figures are sub-divided 
into months and only the past eight or ten years 
are studied, but this is not necessary for the 
purpose of illustration. As a second step, the 
merchant notes from the monthly tables the 
actual figures received for the current year and 
estimates the probable clearings for the current 
year. This may be illustrated somewhat as fol- 
lows: — the merchant notes what proportion the 
clearings for January, February and March have 
heretofore borne to the clearings of the entire 
country. A novice might think it was simply 
necessary to multiply the clearings of three 
months by four in order to have an estimate for 
the entire year, but such a method is not cor- 
rect, since it does not provide for the seasonable 
changes before alluded to- By making a study 
of the relation that these three months bear to 
the entire year for several years back, it is pos- 
sible to make a very good estimate for the en- 
tire current year even if only three months are 
reported. On making this estimate, it is com- 
pared with the total figures for previous years 
and an opinion is formed of the probable busi- 
ness conditions for the current year. If the 
matter were dropped at this point these figures 
would be of no value, but the merchant revises 
this estimate each month, as new figures are 



• BANK CLEARINGS 21 5 

received and also notices whether the revised 
figures are increasing or decreasing. In other 
words, by this second method the merchant 
studies the statistics to note whether each suc- 
ceeding estimate is an increase or a decrease 
over the previous estimate. If the new estimate 
is an increase, this shows that business condi- 
tions are improving as would an upward line 
on the plot. If the new estimate compared with 
previous estimates is a decrease, it shows that 
business is decreasing, as would a downward 
line on the plot. If the new estimate is prac- 
tically the same as the last one, the estimate is 
confirmed and indicates that there is no change 
either for the better or for the worse, the same 
as shov/n by a horizontal line on the plot. 

The remaining point to be considered on the 
subject of bank clearings is the reason for sep- 
arating the subject into the two headings as 
given at the beginning of this paper and also 
as in the above tables. The reason for this sub- 
division is as follows : The clearings of New 
York alone are about one-third those of the en- 
tire country. If these clearings were simply 
a result of commercial business transactions, that 
is, the transactions of merchants, m.anufactur- 
ers and business men, there is no reason why 



216 BUSINESS BAROMETERS 

the New York Clearings should not always be 
included with the clearings of other cities. The 
facts of the case, however, show that an unduly 
large percentage of New York clearings is 
caused by the transactions of brokers or is 
intimately related to the stock exchange trans- 
actions. This may be clearly shown by plotting 
two lines, one for the transactions of the New 
York Stock Exchange and the other for the 
bank clearings of New York. These lines, 
although very "zig-zag," are almost parallel to 
each other, and when one rises the other fol- 
lows, and vice versa. For this reason during 
dull times on the stock exchange, bank clear- 
ings of the United States including Neii* York 
may show a decrease, even although general 
business throughout the country is increasing, 
while during a very active period on the New 
York Stock Exchange, the bank clearings of 
the entire United States including Nezv York, 
may show an increase, even although general 
business throughout the country is decreasing. 
For this reason, in order to judge correctly 
the general business of the entire country, that 
is, the business of the merchants and manu- 
facturers, it is best to consider the bank clear- 
ings of the United States, zi'ith the exceptio7i 
of Nezv York City. If the figures for the United 



BANK CLEARINGS 217 

States zvith the exception of New York City 
have been plotted and a conclusion drawn, it is 
also well to then note the figures for the entire 
country, including New York City. If the fig- 
ures for New York City confirm the conclusion 
arrived at when not including New York City, 
then the result may be considered absolutely 
correct. The most successful merchants tabu- 
late each month, both the figures including and 
excluding Nezv York, but Visually only plot one 
set, zi'hich is often that for the entire country, 
as the records are most complete in this form. 
The following conclusions are suggested rel- 
ative to "Bank Clearings." 

1. During a Period of Business Depression- 

(a) An increase signifies that trade is im- 
proving. 

(b) A decrease signifies that conditions are 
growing worse. 

(c) No change signifies that trade condi- 
tions are remaining fixed. 

2. During a Period of Improvement Folloiving 

a Period of Depression. 

(a) An increase signifies that trade is con- 
tinuing to im.prove. 

(b) A decrease signifies that the improve- 
ment has temporarily been checked. 



218 BUSINESS BAROMETERS 

(c) No change shows that progress is very 
slow. 

3. During a Period of Depression. 

(a) An increase shows that trade conditions 
are very prosperous, although too great an in- 
crease under such conditions often forecasts 
trouble. 

(b) A decrease shows that a change is tak- 
ing place and business is decreasing. 

(c) No change at this point often is a sign 
that a change is about to take place, 

4. During a Period of Decline Following a 

Period of Prosperity, 

(a) An increase signifies a temporary check 
in the decline. 

(b) A decrease signifies that the period of 
prosperity is over. 

(c) No change shows uncertainty or possi- 
bly serves to delay the coming panic. 

Stock Exchange Transactions 

There are three features in connection with 
the New York Stock Exchange which are of 
value in forecasting business conditions. They 
are as follows : 

1. The Quotations. 

2. The Transactions. 



STOCK EXCHANGE TRANSACTIONS 219 

3. The New Securities Listed. (See section 
entitled "New Securities." 

Quotations 

When studying the quotations, only a long per- 
iod of time showing the general tendency should 
be considered. The fluctuations from day to day 
are of no value whatever, nor are the swings 
covering only a period of a few weeks. A study 
of the general tendency of the market, however, 
is of value in forecasting and prophesying 
business conditions. 

If the highest point of each successive major 
swing is higher than the high point of the pre- 
ceding swing and if the low point of each suc- 
cessive swing is not so low as that of the pre- 
ceding swing, then the tendency of the market 
is upward. If the last high point and the last low 
point are lower than the high points and low^ 
points of earlier periods, then the tendency of 
the market is downward. 

In order to study this matter intelligently, a 
plot should be made of the average prices of 
the leading railroad and industrial stocks. The 
list which many merchants use in connection 
v/ith this work is as follows: 

"Central of New Jersey," "Chicago, Milwau- 
kee & St. Paul," Delaware & Hudson," "Great 



220 BUSINESS BAROMETERS 

Northern," ''Illinois Central," "Louisville & Nash- 
ville," "New York Central," "N. Y., N. H. & 
Hartford," "Pennsylvania" and "Pullman." The 
average prices for these ten since i860 are giv- 
en in another chapter of this book. 

As an aid in determining the tendency of the 
market, merchants make a dot at the center of 
each movement, or midway between the high 
point and the low point of each main swing. 
These dots are then connected with a line and 
this line shows at a glance the tendency of the 
market. 

When two or three plots are made, it is in- 
teresting to compare a railroad plot with one 
for industrials, as there is a constant, though 
complicated relation between the two. Space 
does not permit a description of this matter in 
detail, so it must suffice to state that a further 
change in conditions may be discerned more 
quickly by having the two plots, one for rail- 
roads and the other for industrials, than if both 
are averaged together on the one plot How- 
ever, as the industrial quotations almost always 
follozv the railroad quotations, both in a rising 
market and in a falling market, one plot simply 
for the ten stocks above mentioned is perfectly 
satisfactory and avoids confusion. 



STOCK EXCHANGE TRANSACTIONS 221 

If considered in a conservative manner, the 
tendency of the stock market is very interesting 
to merchants when endeavoring to forecast busi- 
ness conditions. This is due to the fact that a 
change in the stock market is the first visible 
sign of a change in general business conditions. 
Raih'oad earnings are absokitely dependent upon 
business conditions, and stock market quotations 
are ultimately dependent upon earnings. There- 
fore, a rising market, over a certain period of 
time, means that the majority of operators be- 
lieve that present conditions are becoming more 
normal, while a falling market means that these 
operators believe that present conditions are be- 
coming very abnormal and unsatisfactory. In 
other words, a study of the stock market gives 
one a composite idea of the opinions of the 
ablest bankers and brokers. This is the reason 
why the stock market often turns to go down 
while railroad earnings are increasing, and often 
turns to go up while railroad earnings are still 
decreasing. In order that an operator may make 
money, some other operator must lose money. 
Therefore, the one who makes the most is not 
only the one who guesses right, but the one who 
makes the right guess first. For this reason the 
stock markt movements are the first public sign 
of a marked change in the relation of present 
business conditions to normal business conditions. 



222 BUSINESS BAROMETERS 

Transactions 

A study of "Quotations," without due consid- 
eration of "Transactions," is of little value, be- 
cause a rising market, during which only a few 
shares change hands, means very little, as such 
a market may be the result of manipulation. 
In the same way a falling market, when only a 
few shares change hands, may mean very little. 
In order to reach a correct conclusion the "quo- 
tations" should be considered in connection with 
the "volume." The principle w^hich we have 
in mind is the same as "foot-pounds" in me- 
chanics, "pounds" by themselves are meaning- 
less, and "feet" by themselves have no signifi- 
cance to th'e engineer. It does not m.ean verj.- 
much to say the power is sufficient to lift a 
l3ody weighing a hundred pounds, or the power 
is sufficient to move a body one hundred feet. 
But when one states, that there is power 
enough to lift one hundred pounds through one 
hundred feet of space, it is possible to judge 
correctly the power involved. A similar rela- 
tion exists between the "Quotations" and the 
"Transactions." 

Therefore the leading bankers not only tabu- 
late the quotations of the leading railroad and 
industrial stocks, but also the number of shares 



STOCK EXCHANGE TRANSACTIONS 223 

traded in during a day. Often in addition are 
tabulated the bond sales on the exchange. When 
the volume of business for any one or more months 
is constant, one may judge business conditions 
by the quotations alone, but unless this vol- 
ume is constant, its variations should always 
be taken into account. An average rise in the 
market of i% with a volume of 2,000,000 shares 
means a rise in the market of more than 4% 
with a volume of only 200,000 shares. 

Under the subject of "Plots and Charts'' may 
be found a description of how plots are used by 
stock exchange houses for prophesying changes 
and turns in the market. This description is 
omitted here, as it need not be read by those 
v/ho wish simply to study the best methods of 
forecasting general business conditions. Statis- 
ticians of stock exchange houses will be inter- 
ested in such reading, but merchants should 
purposely avoid the subject. If followed too 
closely, these stock market plots are apt to be 
misleading, and in turning the attention from 
the main object of this work, are a hindrance. 
The business of the mierchant is not to anticipate 
stock exchange movements, but business 
movements. Although there is a relation be- 
tween the two, they are entirely distinct. 



224 BUSINESS BAROMETERS 

The following conclusions are suggested rela- 
tive to "Stock Exchange Conditions."''' 

1. During a Period of Business Depression. 

(a) An increase is a distinctly favorable 
sign that better trade conditions may be ex- 
pected. 

(b) A decrease is a sign that continued dull- 
ness may be expected. 

(c) No change signifies uncertainty. 

2. During a Period of Improvement Follow- 

ing a Period of Business Depression. 

(a) An increase signifies that still better 
business conditions may be expected. 

(b) A decrease signifies that the improve- 
ment is not to be as rapid as first expected. 

(c) No change signifies temporary uncer- 
tainty. 

3. During a Period of Prosperity. 

(a) A great increase is an unfavorable sign 
for the reason that there is about to be a change. 

(b) A great decline is a distinctly unfav- 
orable sign and signifies that a cessation of busi- 
ness may be expected at any time. 

*(In all studies of "transactions" it must 
always be noted whether the transactions in- 
crease when the prices are increasing or de- 
creasing). 



NEW SECURITIES 225 

(c) No change signifies uncertainty among 
the brokers. 

4. During a Period of Decline Follozuing a 
Period of Prosperity. 

(a) An increase signifies that liquidation is 
in progress. 

(b) A decrease signifies less satisfactory 
conditions. 

(c) No change signifies temporary uncer- 
tainty. 

New Securities 

The reason for studying the subject of "New 
Listings" may be understood by a study of the 
three following fixed laws of economics: 

1. During a Period of Prosperity, as the 
number of nezv companies, nezv promotions and 
new securities listed increases, the danger of a 
panic increases and the time betzueen said period 
of Prosperity and a future period of Depression 
decreases. 

2. JVhen the number of nezv promotions, 
nezv companies and new listings is at a minimum, 
-financial depression is sure to he reaching an end. 

3. As the number of nezv companies, nezv 
promotions and new listings increases from a 
minimum, the gradual increase is a sign of im- 



226 BUSINESS BAROMETERS 

proved conditions until the normal number of 
new companies, new promotions and new list- 
ings is reached, after which an increase again 
becomes a source of danger. 

Oat of the list of twenty-five subjects of 
which this book treats, this one, namely, "The 
Number of New Companies, New Promotions 
and New Securities Listed," is the only one by 
which it was clearly possible to forecast the pan- 
ic of 1903. For this reason this panic was said 
to be due to "undigested securities" and was 
known as "The Rich Man's Panic." 

Of course one cannot rely upon the study of 
this one subject, as many panics have taken 
place when the figure for "New Securities" has 
been normal and the change in conditions could 
only have been forecasted by a study of the 
other subjects. In fact, the difficulty m study- 
ing this subject is that the figures remain very 
constant for a long period of time, and it is only 
the great dips, one way or the other, which are 
of any use. 

Under normal conditions a study of this sub- 
ject is of little value, but most useful under 
abnormal circumstances. If we are in a period 
of depression and we reach a period where no 
new companies are incorporated and there are 
absolutely no new promotions or listings, we 



NEW SECUKITIES 227 

may be sure of better conditions in the near fu- 
ture. Conversely, if we are in a period of pros- 
perity and there are an abnormally large num- 
ber of promotions, an abnormally large number 
of new corporations being formed and new se- 
curities being listed, we may be absolutely sure 
of trouble. This usually comes first in the form 
of tight money, followed immediately by a de- 
cline in the stock market and later by a period of 
depression in business conditions. 

The following figures clearly show this and 
particularly in connection with the "Panic of 
1903.'^ 



Year 


Stocks: Total value includ- 
ing new capital, old and re- 
funding issues. 


Year 


Bonds: Total val- 
ue including nev/ 
capital, old and re- 
funding issues. 


1885 


$56,913,116 


1885 


$197,259,000 


1886 


329,469,350 


1886 


238,097,690 


1887 


270.053,550 


1887 


343.477.321 


1888 


248,228,275 


1888 


511,002,218 


1889 


259.649.774 


1889 


389,720,000 


1890 


437.992,330 


1890 


684,867,879 


1891 


188,914,954 


1891 


287,645,700 


1892 


237,036,105 


1892 


317,861,500 


1893 


198,245,261 


1893 


288,803,400 


1894 


251,193,003 


1894 


309,804,600 


1895 


143.373.970 


1895 


257,275,400 


1896 


590,732,215 


1896 


582,286,700 


1897 


502,974,891 


1897 


357,415,902 


1898 


528,153,996 


1898 


700,064,680 


.1899 


704,172,605 


1899 


525,384,240 



228 BUSINESS BAROMETERS 



1900 


620,935,000 


1900 


443,713,000 


I90I 


1,642,013,715 


I90I 


923,010,100 


1902 


784,032,595 


1902 


a533,5i9>300 


1903 


426,890,295 


1903 


581,288,800 


1904 


175,866,800 


1904 


535.079,600 


1905 


533434,900 


1905 


980,026,650 


1906 


662,769,450 


1906 


b57i, 898,500 


1907 


576,032,050 


1907 


420,813,000 


1908 


513,927,450 


1908 


827,958,000 



(a) Does not include Imperial Russian States 
4% Certificates $1,155,000,000. 

(b) Does not include §425,000,000 Japanese 
Government bonds. 

Therefore all merchants systematically tabu- 
late each month the amount of new securities 
listed, although the ''stocks" and ''bonds" are 
added; thus avoiding the necessity of tivo tables. 

The following conclusions are suggested rel- 
ative to "New Securities Issued." 

1. During a Period of Business Depression. 

(a) An increase signifies that confidence is 
returning. 

(b) A decrease signifies that continued dull- 
ness may be expected. 

(c) No change generally signifies the same. 

2. During a Period of Improvement Follow- 

ing A Period of Business Depression. 
(a) An increase signifies that permanent im- 
provement is under way. 



NEW SECIJRITIES 229 

(b) A decrease means that the improvement 
has been temporarily checked. 

(c) No change signifies that the improve- 
ment is progressing very slowly. 

3. During a Period of Prosperity. 

(a) An increase, especially if great, is a sign 
of impending disaster and the culmination of 
the period of prosperity. 

(b) A decrease tends to lengthen said per- 
iod. 

(c) No change usually calls for caution. 

4. During a Period of Decline FoUozving a 

Period of Prosperity. 

(a) An increase is a sign that much worse 
conditions may be expected before the bottom 
is reached. 

(b) A decrease indicates that conditions are 
naturally adjusting themselves. 

(c) No change is a bad sign, if large issues 
are still being offered, but otherwise it shows 
nothing of importance. 

Business Failures 

Every great crisis has been made known to 
the public by one or more large failures, some- 
times accompanied by the exposure of dishonest 
methods, sometimes by political or national calam- 



230 BUSINESS BAROMETERS 

ity, more often by the failure of some bank or 
number of banks in endeavoring to finance in- 
dustries or ne|\v corporate undertakings. So 
failures, — that is, large, single failures, — stand 
as signals of sharp crises^ and the beginning of 
depression. They may be followed by other 
large failures and many small ones, so quickly 
that the total of both number of failures and 
liabilities for the panic year is swelled as in 
1893, above the limits of other years just pre- 
ceding or following it, or the failure record may 
move slowly and more than a year be needed 
for any great change. Failure statistics, how- 
ever, are of principal use in determining the 
probable length of a period of depression, and 
the following figures show that — following a 
crisis — in no case has prosperity returned until 
failure statistics became normal. 
FAILURE STATISTICS FOR THE UNITED STATES 
Table i 
Compiled from figures furnished by R. G. Dun & Co. 



Year 


No of 
Failures 


Liabilities 
Expressed 
in Millions 


Year 


No of 
Failures 


Liabilities 
Expressed 
in Millions 


1857 


4,932 


291.8 


1865 


530 


17.6 


1858 


4,225 


95-7 


1866 


1,505 


53-8 


1859 


3,913 


64.4 


1867 


2,780 


96.7 


i860 


3,676 


79.8 


1868 


2,608 


63.7 


1861 


6,993 


207.2 


1869 


2,799 


750 


1862 


1,652 


23.0 


1870 


3,546 


88.2 


1863 


495 


7-9 


1871 


2,915 


85.2 


1864 


520 


8.6 


1872 


4,069 


121. 1 



BUSINESS FAILURES 231 



1873 


5,183 


228.5 


1891 


12,273 • 


189.9 


1874 


5,830 


155-2 


1892 


10,344 


114. 


1875 


7,740 


201.0 


1893 


J5,242 


346.8 


1876 


9,092 


191. 1 


1894 


13,885 


172.9 


1877 


8,872 


190.7 


1895 


13,197 


173.2 


1878 


10,478 


234-4 


1896 


15,088 


226.1 


1879 


6,658 


98.1 


1897 


13,351 


1543 


1880 


4,735 


65.8 


1898 


12,186 


130.7 


I88I 


5,582 


81.2 


1899 


9,337 


90.9 


1882 


6,738 


101.5 


1900 


10,774 


138.5 


1883 


9,184 


172.9 


1901 


11,002 


II3-I 


1884 


10,968 


226.3 


1902 


11,615 


117-5 


1885 


10,637 


124.2 


1903 


12,069 


155-4 


1886 


9,834 


114. 6 


1904 


12,199 


144-2 


1887 


9,634 


167.6 


1905 


11,520 


102.7 


1888 


10,679 


123.8 


1906 


10,680 


119.2 


1889 


10,882 


148.8 


1907 


11,725 


1974 


1890 


10,907 


189.9 









As example of such reading of the figures, 
note in the above table the year 1857, both for 
number and liabilities. Note that the crisis is 
indicated in the amount of liabilities, while 1858 
shows a still larger number of failures but a 
reduction of liabilities amounting to more than 
32.8 per cent. The next three years show de- 
pression by a relatively large number of failures ; 
but they are of lessening average amount of li- 
abilities. That failure of statistics may indicate 
not only the length but the general character of 
a depression is proved particularly well from the 
course they take after the crisis year of 1873 to 



232 BUSINESS BAROI^IETERS 

the height of the depression in 1878 and for a 
shorter period from 1893 to the cuhiiinating 
year of 1896. From this table it is evident- also 
that the number of failures is often larger 
toward the end of the depression than during 
the crisis year, but the average of liabilities per 
failure is less. 

FAILURE STATISTICS FOR THE UNITED STATES 

Table 1 1 

Compiled by figures furnished by R. G. Dun & Co. 

Per 

Liabilities Liabilities cent 
Number of Average per capita per firm in of 

Year Failures Liabilities Liabilities of population business fai'res 

1875 7,740 $201,060,333 $25,960 $4.55 $339.87 1.21 



1876 


9,092 


191,117,786 


21,020 


4.23 


305.15 


1.33 


1877 


8,872 


190,669,936 


21,491 


4.11 


302.60 


1.36 


1878 


10,478 


234,383,132 


22,236 


4.92 


259.49 


1.55 


1881 


5,582 


81,155,932 


14.530 


1.58 


108.65 


.71 


1882 


6,738 


101,547.564 


15,070 


1.93 


129.94 


.83 


1883 


9,184 


172,874,172 


18,823 


3.22 


210.23 


1.06 


1884 


10,968 


226,343,427 


20,632 


4.12 


261.94 


1.21 


1885 


10,637 


124,220,321 


11,678 


2.21 


137.28 


1.16 


1886 


9,834 


114,644,119 


11,651 


2.00 


124.60 


1.01 


1893 


15,042 


346,779,889 


22,751 


5.22 


290.65 


1.28 


1894 


13,885 


172,992,856 


12,458 


2.55 


155.25 


1.25 


1900 


10,774 


138,495,673 


12,854 


1.81 


119.63 


.92 


1901 


11,002 


113,092,376 


10,279 


1.45 


94.63 


.90 


1902 


11,615 


117,476,769 


10,114 


1.49 


94.85 


.93 


1903 


12,009 


155,444,185 


12,879 


1.94 


122.33 


1.12 


1904 


12,199 


144,202,311 


11,820 


1.76 


111.33 


.92 


1905 


11,520 


102,676,172 


8,193 


1.24 


78.75 


.85 


1906 


10,682 


119,201,515 


11,159 


1.41 


86.52 


.77 


1907 


11,725 


197,385,225 


16,834 


2.31 


139.75 


.82 


1908 


15,690 










1.08 



From this second table we have another view 
of the usefulness of failure statistics. As in 



BUSINESS FAILURES 233 

table one, the panic years are plainly marked 
by the per cent, of failures to the total number 
of firms in business, but table two also shows 
something additional relative to business condi- 
tions. 

We find that up to 1878 the possibility of loss, 
that is the ratio of "liabilities" to the "nnmber 
of firms actually in business," was large or in- 
creasing from year to year, as was again true 
from 1893 to 1896, while the effect of the cri- 
sis of 1903 gave place very quickly to prosperous 
conditions, not equalled in this respect for thirty 
years. This table gives a very valuable measure 
in the "per cent of failures" to the firms in busi- 
ness. This shows that such figures as it, 002 
for the failures in 1901 and 10,428 for 1878 
marked two degrees of depression more widely 
different than they would seem at first glance, 
and that the high number 11,725 of 1907 or 
even 15,675 in 1908 to an indication of condi- 
tions much less severe than the 7,740 of 1875. 

Nevertheless, the study of the past, however 
interesting as pure history, is regarded only as 
a means of understanding the significance of 
current changes and the points above mentioned 
are of value only in connection with the present 
day figures. 

The year 1907 is of special interest in this con- 



234 BUSINESS BAKOMETERS 

nection. It is known as a ''panic year," and the 
events of the months following October with its 
signal failures of certain New York banks be- 
comes a part of history closely joined to present 
problems. While it is true that not one, but all 
factors, must be weighed together in estimating 
the comparative position of 1907 among critical 
periods, the statisticians find something of spe- 
cial value in the statistics of failures. 

Statistics of the year are available in different 
forms. Divided into months, as is the custom- 
ary way for merchants to compile them, there 
is meaning to be found in the year's record on 
lines similar to those used for the annual tables. 
The follovv^ing figures for liabilities expressed in 
millions, serve as illustrations : The ''number" 
is omitted from these tables, as it is not custom- 
ary for merchants to record said figures. If 
additional tables are desired, the "per cent to 
the firms in business" is recomxmended. 

Compiled from figures furnished by R. G. 
Dun & Co. 



IVlonth 


1903 


1904 


1905 


Jan. 


$12,978 


$18,483 


$10,417 


Feb. 


10.907 


15.812 


9.780 


Mar. 


10.458 


13.770 


9.964 


Apr. 


11.811 


13-136 


8.056 


May 


12.314 


9.817 


8.907 



BUSINESS FAILURES 



235 



I 



June 


8.326 


8.469 


8.777 


July 


17751 


8.812 


6.148 


Aug. 


10,877 


10.491 


6.140 


Sept. 


7.229 


12.864 


8.039 


Oct. 


18.387 


10.525 


6.751 


Nov. 


16.^22 


8,535 


8.866 


Dec. 


18.978 


13.481 


10.823 


Vionth 


1906 


1907 


1908 


Jan. 


11.952 


13.628 


27.099 


Feb. 


10.859 


10.283 


27.064 


Mar. 


10.949 


8.163 


21.542 


Apr. 


8.059 


11.082 


20.316 


May 


12.992 


9-965 


13.643 


June 


7.850 


16.444 


14.708 


Jtiiy 


6.919 


12.334 


14.222 


Aug. 


8.821 


15-197 


23.782 


Sept. 


6.255 


18.935 


17.298 


Oct. 


IO-553 


27.444 


15.898 


Nov. 


11.980 


17.637 


12.599 


Dec. 


12.006 


36.296 


14.139 



These tables give examples of what may serve 
as types of years, that is, 1903 had what was 
called ''the rich man's panic" beginning with the 
stock market in the summer of that year and 
continuing as shown very clearly by the tables. 
Normal years, such as 1905 or 1906, show heav- 



236 BUSINESS BAROMETERS 

iest liabilities from October to March, any in- 
crease between these times coming just before 
or just after the fiscal year. The presence of 
business trouble is indicated in July of 1903, 
when we find the amount of liabilities very much 
increased; moreover, the increase and this ratio 
are maintained, practically unbroken for ten 
months. While this table cannot of itself give 
us entire information, because a true study of 
statistics goes no further than absolute knowl- 
edge, the points just shown bring us close to 
our every day use of such figures. Without 
knowing anything of the exact causes, a man 
with these figures at his hand could not have 
failed to think a little when, in the report for 
June 1907, liabilities ran over 40% higher than 
in 1906 and nearly as much higher than 1905. 
As the new figures were received each month 
and the month of September reached an aggre- 
gate of nearly $19,000,000 compared with 
$8,039,947 fo^ the same number of failures in 
September 1905, surely the change in ratio could 
have told something very definite as to the ap- 
proach of bad times. Considering the liabili- 
ties in connection with the per cent, of fail- 
ures we find the crisis month to have been No- 
vember, (average liabilities $32,026.80 as com- 
pared with December $30,760.06) for we main- 



BUSINESS FALLURES 237 

tain that the smaller "per cent." with heaviest 
liabilities, marks the financial climax; that is, 
the public break or the great signal failure that 
openly declares trouble. By the quickest, 
roughest estimates, the course of affairs can be 
very plainly traced by having these failure sta- 
tistics at hand. 

While to obtain accurate comparisons of the 
progress of the current year, as compared with 
others, always requires more close calculating 
of the percentage in gain or loss per Urm in 
business, yet the work yields a good return. 
These current figures are those most constantly 
watched by bankers and merchants who prefer 
to have their own eyes on the clouds ahead, 
rather than trust entirely to a less interested 
authority. 

The following table (Bradstreet's) is 
also of interest in connection with analyses of 
failures, although these figures are of no use in 
forecasting business conditions. 
PERCENTAGE OF FAILURES AND LIABILITIES 
CLASSIFIED AS TO CAUSES 
UNITED STATES PER CENT 



Number 

Failure due to 1907 1906 1905 1904 

Incompetence. 22.6 22.3 24.4 23.1 

Inexperience .. 4.9" 4.9 4.8 5.1 

Lack of capital 37.1 35.9 33-4 32.2 

Unwise credits 2.3 2.6 3.5 3.4 
Failures of 

others 1.4 2.0 2.2 2.5 



Liabilities 

1907 1906 1905 1904 

8.9 15.5 21,6 14. I 

3.2 2.2 2.1 3.2 
18.4 30.9 33.0 31.8 

3-1 2.1 4.2 4.8 

3.3 8.8 4.5 8.2 



238 BUSINESS BAROMETERS 

Number Liabilities 

Failure due to 1907 1906 1905 1904 1907 1906 1905 1904 



Extravagance . .9 i.o i.i .8 

Neglect 2.5 2.2 2.9 3.1 

Competition .. 1.2 i.o 1.5 1.3 
Specific Con- 
ditions 16,3 17.3 16.3 19. I 

Speculation ... .7 .8 .7 .8 

Fraud 10. i 10. o 9.2 8.6 



.5 .9 -12 .7 

•S i.S i-i 1-6 

.4 .4 .9 i-o 

SI. 7 17.9 iS-S 22.7 

4-9 3.6 7.7 5-3 

S.I 16.2 8.2 6.4 



For example, if 1907 showed, as is claimed, 
37.1% failure due to loss of capital, and if fig- 
ures show that this cause is increasing year by 
year, it means clearly that the beginnings of 
new enterprises must be increasingly well sup- 
ported, as it grows more difficult to add to inad- 
equate capital when money rates are high or 
competition makes it imperative to expand. As 
inexperienced, comparatively incompetent heads 
must continually join the ranks, constant watch- 
ing of the details of failure statistics is a prac- 
tical necessity for them as well as for those 
Avhose money is invested in their interests. 

As Bradstreet's tables exclude all losses ex- 
cept those strictly commercial ; that is, those 
failures involving loss to creditors of individual 
firms, or corporations engaged in legitimate 
mercantile occupations, they cannot be com- 
pared, figure for figure, with the tables from 
other sources, but believing that the figures due 
to failure in insurance, real estate, brokerage, 
etc.. do have a distinct effect upon general 



BUSINESS FAILURES 239 

business conditions, the analysis of these also 
should be a part of a study of the whole sub- 
ject. Certain facts, however, included in the 
interesting report before alluded to, should be 
mentioned here as bearing on the question. One 
of these we have already suggested; namely, 
that as the country advances, statistics furnish 
evidence that the "commercial death rate" is 
growing less. The decrease is as yet not one- 
half of one per cent., but the rate is being re- 
duced from i^% maximum to something under 
1%. Of course we should like to believe that 
this is a permanent improvement in business 
intelligence, but this point the future only can 
prove. 
\y Another law recognized by merchants and 
already suggested in this discussion, is that small 
firms do not feel the effect of a panic or de- 
pression until sometime after the effect is felt 
by the larger firms. For this and other reasons 
the study of this subject is especially valuable 
as a guide and protection to small merchants 
and storekeepers. 

In conclusion we will repeat that the figures are 
of greatest value to all in determining wh?.t the 
length of the present "period" will be, and how 
soon one's own business and that of others, in 



240 BUSINESS BAROMETERS 

which he has greater or less investments of capi- 
tal, may be expected to show a change. When 
the flood begins to subside from its high water 
mark, a study of the rate at which it is sub- 
siding, and a knowledge of the condition of each 
tributary stream assists very much in estimating 
the time when seed may be planted in the rich 
bottom land, now under water, or inversely as 
the case may be. We need not carry this figure 
of speech further, in order to show that it con- 
tains the idea upon which merchants rate the 
study of Business Failures as of fundamental 
importance to their progress. For such study 
is but a part of a system by which they may 
know exactly the conditions upon Vv'hich the 
next move should be based, and upon the re- 
sult of which depends the subsequent course of 
the business life of each individual. 

The following conclusions are suggested rel- 
ative to ''Business Failures." 

I. During a Period of Business Depression- 

(a) An increase signifies that the depression 
is not ended. 

(b) A decrease, after a large increase, signi- 
fies that a change for the better may be expect- 
ed. 



BUSINESS FArLURES 241 

(c) No change signifies that caution is still 
necessary. 

2. During a Period of Improvement Following 

a Period of Business Depression, 

(a) An increase in failures signifies that the 
improvement may be temporarily checked. 

(b) A continued decrease signifies that the 
improvement is progressing satisfactorily. 

(c) No change signifies that caution is still 
necessary. 

3. During a Period of Prosperity. 

(a) An increase in failures, especially large 
concerns, signifies that a change for the worse 
may be expected. 

(b) A decrease signifies that prosperity may 
be expected to continue a while longer. 

(c) No change signifies nothing of import- 
ance. 

4. During a Period of Decline follozving a 

Period of Prosperity. 

(a) An increase signifies that conditions are 
daily becoming worse. 

(b) A decrease signifies that a temporary 
check may be expected in the decline. 

(c) If there is no change the figure need 
not be considered. 



242 BUSINESS BAROMETEKS 

Immigration Figures and Labor Conditions 

The general subject of labor conditions is of 
importance in diagnosing present business con- 
ditions and in forecasting changes which may 
be expected. But labor interests involve so 
many factors and include so wide a field of in- 
vestigation that, with the statistics at present 
available, it is absolutely impossible to compile 
figures that are sufiiciently complete to tabulate 
for comparative purposes. It is hoped that some 
day either the labor unions or the government 
will find some practical means of keeping exact 
records of the number of men out of work, the 
rate of wages in effect and other items necessary 
for this purpose. 

At present the only complete figures are the 
census reports compiled once in ten years, and 
partial figures of some of the states reported 
only once in five years, but neither set of fig- 
ures is of much use to the business man. There 
are also certain states which, in connection with 
the public employment bureaus, publish a classi- 
fied list every week or month entitled "applicants 
desiring work," but these lists are very incom- 
plete and their records of little more practical 
use, as statistics, than are the similar records 
kept by the leading charitable institutions. If 
every city or charitable institution did the work 



LABOR CONBITIONS 243 

thoroughly and kept the dead matter weeded 
out, a pubhcation of the results would be worth 
while, although they might cover but a small 
portion of the country. The same might be 
said of the labor union figures. These, if kept 
properly and accurately for a definite period 
and area, would be very valuable to the m^anu- 
facturer and business man, but under present 
conditions they are at the most only suggestive, 
not fit for precise analysis. Of all available sta- 
tistics, those coming from the Commissioner of 
Labor are the most to be depended upon ; month- 
ly reports of the same sort would be of distinct 
value for the purposes of Fundamental Statis- 
tics. With his present office methods however, 
even his work is not at all adapted to our use. 

For either determining the present trend or 
forecasting the approaching conditions, only fig- 
ures which can be used for comparative purposes 
are of value. It is not necessary to have month- 
ly figures covering a large section of the coun- 
try, but they must cover the same section of the 
■country at each statement. It makes little differ- 
ence whether the reports are issued weekly or 
monthly, but it is of vital importance to sys- 
tematic work that each report should cover the 
same period of time, — that is, either one Vveek 
>or one month regularly. Therefore, while there 



7.44 BUSINESS BAROMETERS 

are today many organizations preparing figures 
which may, after a time, become of distinct 
value for comparative purposes, none of them 
have yet reached the point, — with the possible 
exception of those from the Immigration De- 
partment of the United States. 

The immigration figures are issued monthly, 
each report covering the same ports, and these 
figures . all systematic manufacturers and mer- 
chants carefully tabulate. 

One of the valuable features of the present 
day method of studying Fundamental Statis- 
tics, under twelve general headings, is that un- 
der each general heading or group, sub-topics 
can be added at any time, extending over an 
increasing amount of subject-matter. For ex- 
ample, the subject of this group is "Labor Condi- 
tions" and at the present time the only figures 
tabulated are those on immigration, but as soon 
as suitable reports from the labor unions, char- 
itable institutions, or other sources are obtain- 
able, additional tables can be inserted for these 
additional figures. All such subjects, accurately 
reported will contribute to an exact understand- 
ing of the condition of labor in this country. In 
other words, in the final deductions, the same 
amount of weight will be given to ''Labor Con- 



LABOR COIVDITIONS 245 

ditions" as fonnally, but in arriving at our de- 
cision as to labor conditions, there will be more 
factors to consider. 

The reason for using immigration figures, is 
that they are an extremely good barometer of 
labor conditions. The steamship lines maintain 
a balance in the supply of labor between the 
United States and Europe. Labor, like water, 
seeks its own level, when both living expenses 
and wages are considered. Of course, if it costs 
five times as much to live in New York as in 
Italy, the Italian laborer w^ill not come to this 
country for simply five times the wages that he 
receives at home, provided the demand for la- 
bor is the same in each country. Therefore, 
wages, living expenses and demand must be 
considered. On the other hand, if the Italian 
can obtain wages in New York equal to ten 
tim^es what he will receive in Italy, he will board 
a steamer for the United States, even with the 
expenses in New York five times as great as at 
home. Such high wages the Italian may always 
obtain in America in times of prosperity, and 
especially in times just preceding the culmin- 
ation of a period of prosperity. 

Conversely, when this period culminates, the 
dem.and for labor decreases, wages decrease and 
the Italian boards a steamer and returns to 



246 BUSINESS BAROMETTERS 

Italy. Therefore, as the Government keeps a 
careful record of when the immigrant enters the 
country and when he leaves, this report is an 
extremely good barometer of the labor condi- 
tions in the United States. Of course under 
almost any circumstances there are more people 
coming into a new country, like the United 
States, than there are going out, but the size of 
this excess number is very sensitive to changing 
conditions in the country as a whole. 

By studying and comparing the figures of the 
past twxnty years, it will be seen that a crisis or 
depression in business conditions came very 
soon after the highest figures for immigration 
are reached. It is likewise true that there was 
an improvement in business conditions when, 
during a period of depression and very low tide 
of immigration, there began to be an increase 
in immigration. In other words, very large 
numbers of alien arrivals during a period of 
prosperity may be counted as one of the factors 
signifying a culmination of such a period of 
prosperity. Conversely, a steady increase in the 
incoming steerage during a period of depression, 
is one of the factors significant of beter busi- 
ness conditions. 

As is the case with most of the others of 
these subjects studied by bankers and merchants, 



liABOR CONDITIOXS 247 

an increase does not always mean the same thing, 
neither does a decrease under all circumstances. 
Sometimes an increase is a dangerous sign and 
som.etimes tells of improvement, and the same 
with a decrease. These things cannot be re- 
duced to a rule of thumb, but the merchant must 
use his judgment to a certain extent. The rule 
given above however, is almost infallible. 

There is also another reason w^hy these immi- 
gration figures are of interest, namely: the 
aliens leaving the country are not only a barom- 
eter of business conditions, but they also influ- 
ence the trend of those conditions. When a for- 
eigner enters this country he usually brings a 
little mioney, for he knows that he will need a 
place in which to sleep while here and must 
have some food and clothes. On the other hand, 
v;hen leaving the country he takes from circula- 
tion a certain amount of money which is almost 
invariably many times what he brings into the 
country. In addition he directly reduces the 
income of some landlord and the business of 
some small grocer and dealer in second-hand 
clothing. 

Therefore very large immigration figures dur- 
ing periods of prosperity mean that there are 
many people who will be obliged to leave the 



248 BUSINESS BAROMETERS 

country as soon as the period of prosperity cul- 
minates, and therefore the reaction will be great- 
er and even more severe than if they had not 
entered the country. In the same way an in- 
crease during a period of depression not only 
signifies better conditions, but these people enter- 
ing the country are themselves the means of 
creating better conditions both by the amount 
of money which they bring with them and the 
business which they create after arriving. There- 
fore the necessity of tabulating monthly figures 
on immigration. 

The following conclusions are suggested rel- 
ative to immigration figures. 

These figures have special bearing on the Con- 
dition of Labor in the United States. 

1. During a Period of Business Depression- 
's.) An increase after a distinct decrease 

shows that conditions are improving. 

(b) A continued decrease signifies that con- 
ditions are not as yet improving. 

(c) No change signifies that conditions are 
at a standstill. 

2. During a Period of Improvement Follozving 

a Period of Business Depression. 
(a) An increase signifies that the improve- 
ment in conditions is progressing satisfactorily. 



IMPORTS OF MERCHANDISE 249 

(b) A decrease signifies that the improve- 
ment is temporarily checked. 

(c) No change signifies nothing definite. 

3. During a Period of Prospeyity. 

(a) A great increase calls for caution. 

(b) A decrease signifies that the corner is 
being turned and a reversal of conditions may- 
be expected. 

(c) No change signifies that prosperity may 
be expected to continue longer. 

4. During a Period of Decline Following a 

Period of Prosperity. 

(a) An increase signifies a temporary check 
in the decline. 

(b) A decrease signiftes that conditions are 
rapidly becoming worse. 

(c) No change signifies nothing definite. 

Imports of Merchandise Into the United 
States 

Connected with Fundamental Statistics and 
very closely related to one another are the three 
following subjects : 

Imports of Merchandise into the United States. 

Exports of Merchandise into the United States. 

Balance of trade between the United States 
and foreign countries. 



250 BUSINESS BABOMETBRS 

Each of the three subjects is absolutely de- 
pendent upon the others and were it not for the 
separate tables connected with each individual 
subject, it would doubtless be simpler to treat 
all three in one comprehensive section entitled 
"Imports, Exports, Trade Balances and Vol- 
ume." 

Owing, however, to the fact that it is abso- 
lutely necessary for the banker or merchant to 
divide the figures into three separate tables and 
not allow them to be combined in any way, each 
is ¥ere treated independently. 

No detailed definition need be given of the 
imports of the United States, except that the 
word import refers to ,the valuation of the raw 
material, manufactured goods and all other pro- 
ducts purchased from abroad and entering 
any port or crossing any boundary of the United 
States. It may be mentioned also that although 
the figures published by the Government are 
correct for comparative purposes, they are of 
themselves low. For this there are two reasons : 
first, there is, without doubt, a large quantity 
of goods brought into this country of which no 
record is ever made; and second, the "values" 
are placed by the importers at the lowest possi- 
ble figures in order that the charge for duty 
will be as little as possible. 



IMPORTS OF MERCHANDISE 251 



(Figures prior to 1867 are given 


for the fis- 


cal year 


ending June 30. After that year they 


are for the calendar year). 






Table of U. S. Imports 




Year 


Imports 


Per capita. 


i860 


$353,616,119 


$11.25 


1861 


289,310,542 


9.02 


1862 


189,356,677 


5-79 


1863 


243,335.815 


7.29 


1864 


316,447,283 


9-30 


1865 


238.745.580 


6.87 


1866 


434,812,066 


12.26 


1867 


371,476,175 


10.23 


1868 


368,006,572 


9-94 


1869 


438,455.894 


11.60 


1870 


461,132,458 


11.97 


1871 


573,111,099 


14.47 


1872 


655,964,699 


16.15 


1873 


595,248,048 


14.27 


1874 


562,115,907 


13-13 


1875 


503.153.936 


11.43 


1876 


427,347,165 


9-47 


1877 


480,246,300 


10.37 


1878 


431,812,483 


9.07 


1879 


513,602,796 


10.52 


1880 


696,807,176 


13.88 


1881 


670,209,448 


13.06 



252 BUSINESS BAROCETERS 



Year 


Imports 


Per capita. 


1882 


752,,843'507 


14.36 


1883 


687,066,216 


12.81 


1884 


629,261,860 


11.48 


1885 


585,868,673 


10.49 


1886 


663,429,189 


11.57 


1887 


708,818,478 


12.09 


1888 


725.411,371 


12. II 


1889 


770,521,965 


12.58 


1890 


823,397,726 


13-15 


1891 


828,320,943 


12.96 


i8Q2 


840,930,955 


12.91 


1893 


776,248,924 


11.68 


1894 


676,312,941 


9-97 


1895 


801,669,347 


11.60 


1896 


681,579.556 


9.66 


1897 


742,595,229 


10.32 


1898 


634,964,448 


8.66 


1899 


798,967,410 


10.68 


1900 


829,149,714 


10.86 


I90I 


880,419,910 


11.34 


1902 


969,316,870 


12.30 


1903 


995494.327 


12.42 


1904 


1,035,909,190 


12.71 


1905 


1,179,144,550 


14.24 


1906 


1,320,501,572 


15.69 


1907 


1,434,421,425 


16.55 


1908 


1,116,449,681 


12.85 



l3fPORTS OF 3IERCHANDISE 253 

In studying the above tables it is convenient 
to refer to only the *'per capita" column which 
shows very clearly the great value of these fig- 
ures in forecasting a panic. At the close of 
the Civil War the people were importing on a 
basis of about $io per capita and this steadily in- 
creased to over $i6 in 1872. This increase was 
far above what it should have been and was 
therefore naturally followed by the panic, which 
came the following year, namely, 1873. -"^^ is 
the case with all panic years, the imports im- 
mediately dropped of¥ from $16 to about $14 
and steadily decreased for about five years. 

Beginning with 1879 the imports again in- 
creased and property likewise increased until 
1882, when they again reached $14.36 per cap- 
ita. Although this figure was not equal to 
the previous high figure for 1872, yet 
the rise was more rapid and it is not 
surprising that in the latter part of the 
following year there occurred another panic, 
namely, the panic of 1883-4. In 1885, or di- 
rectly after this panic, imports again dropped 
to a minimum of $10.49, ^^^ gradually increased 
along the normal line until they reached over 
$13.00 per capita, at which point they remained 
constant during 1890, 1891 and 1892. As could 
readily have been predicted, these high figures 



254 BUSINESS BAROMETERS 

were followed by another panic in 1893. During 
the next year, as is invariably the case, the im- 
ports again declined to $9.97. Since that time 
they have increased to a more or less irregular 
rate up to 1907 when they again reached $16, 
at which figure they stood preceding the great 
panic of 1873. Then followed a sharp reduction 
to $12.87, coincident with the panic of 1907-08 
and its curtailing of imported luxuries. The above 
tables therefore show that the same law has been 
observed in connection with all panics excepting 
that of 1903, which, as explained under "New 
Securities," was due to one specific cause as 
stated by Mr. Morgan; namely, "the congestion 
of undigested securities." Where the figures on 
80% of our subjects clearly forecasted all pan- 
ics excepting said panic of 1903, in only a few 
tables was the approach of this panic indicated. 
On the other hand, in these few tables, especially 
the table for "New Securities Listed" and "New 
Corporations," the increase was so tremendous, 
several hundred per cent-, that they of them- 
selves were a sufficient danger signal, even 
although the figures on the other subjects ap- 
peared normal. 

In studying the figures on imports, we see 
that too great an increase in imports is a dan- 
gerous sign. This is due to two reasons : first, 



IMPORTS OF MERCHANDISE 255 

that it necessitates the exportation of too much 
gold and secondly, that it signifies too great an 
extravagance on the part of the American peo- 
ple. As continued exports of gold are usually 
followed by advanced money rates, so too great 
an expenditure of money for luxuries and un- 
productive material, especially when imported, 
is followed by a period of economy and repen- 
tance. 

Not only are large figures for imports sug- 
gestive of a panic, but small figures, especially 
when they are increasing at a slow and conserv- 
ative rate, are suggestive of better times. This 
latter phase is especially well illustrated in an 
article which appeared some time ago in the 
New York Evening Post. This begins by re- 
ferring to a Wall Street man who rather fa- 
cetiously remarked that good times were surely 
coming for he noticed that people were "wearing 
their old clothes." This remark, made careless- 
ly, nevertheless was a statement of the tremen- 
dously important factor which personal thrift 
becomes during a period of depression. 

In times of abounding prosperity it is easy 
for people to assume a contemptuous attitude 
toward petty economies. The talk is of making 
money, not of saving it. But a panic brings 
out tlie economic truth about the relation of 



256 - BUSINESS BARO^IETERS 

savings to new business operations. '*It must 
always be remembered," writes Lord Welby, 
commenting on an American panic in the Con- 
temporary Review, "that the capital required 
to extend business and to open new fields of 
trade can only be supplied by the savings of the 
world But there is a limit to these ac- 
cumulations, large as they are. If the passions 
of the world, the extravagance of the world, and 
above all the growing needs of the world trench 
too closely on the accumulations of the world, 
financial stringency will inevitably be the result." 
And it is a fact that even the most trivial form 
of saving becom.es a large financial operation 
when generally practised. 

How much can the American nation save by 
each m.an wearing his clothes two years instead 
of one? The census report of manufactures 
shows that the factory product of men's cloth- 
ing during a good year is valued at about $375,- 
000,000. One-third of this, or considerably less 
than one-third on the basis of retail prices, would 
more than equal the entire balance of trade in 
this country's favor in a normally favorable 
month. 

There are over $40,000,000 worth of felt hats 
sold during a good year. By wearing their 



EMPORTS OF MERCHANDISE 2 57 

felt hats 50^c longer than they have been ac- 
customed to doing, plain Americans can effect 
a saving, in a year, greater than the great gold 
imports necessary to adjust conditions during a 
critical period. 

"Yet it is not always with clothes that people 
adopt a policy of retrenchment. If, for example, 
they cut down by only one-third the amount 
they spend on fresh beef, leaving all other items 
on the butcher's bill unaltered, the sum would 
be greater than twice the amount paid over the 
counters of the bank which in October 1907, 
endured the longest "run" in the history of 
banking institutions. Contract by the same pro- 
portion the consumption of all kinds of meat, — 
and many authorities think this would be well 
worth while from a hygienic point of view alone, 
— and a sum equal to the entire Government 
surplus at the time of the panic on Nov. i, 1907, 
would be saved in less than ten months. 

As to the commodities which are classed as 
real luxuries, the facts are equally striking. 
Enough cigars were "withdrawn for consump- 
tion" in 1907 to provide about eight and one- 
half cigars a week for every smoker, on the 
assumption that one-fifth of the total popula- 
tion, including babes in arms, may fairly be 



2 58 BUSINESS BARO^IETERS 

put down in that class. Even for mere pur- 
poses of illustration, no one would be cruel 
enough to suggest treating the cigars as the 
colonists once treated the tea. But in a great 
emergency the average smoker might consider 
cutting down his allowance to one cigar a day. 
That trifling act would make a difference in 
the country's cigar bill of three and one-half 
millions a year-" 

It would of course be a simple matter to 
carry the calculation through other departments 
of production, but the above suggestions are 
enough to illustrate this second reason for tab- 
ulating monthly figures on imports, as a barom- 
eter of economy. It is, however, unnecessary 
that the monthly figures should be tabulated on 
a per capita basis, as the change in population 
is so slight. 

Many merchants when studying foreign trade, 
instead of considering exports and imports sep- 
arately, add them together and call their sum 
the volume of trade. This figure is valuable 
as a barometer of general business activity. It 
should not be confused with the balance of trade 
which is the difference between exports and im- 
ports and is watched by bankers for its effect 
upon the money rates and gold supply. 



IMPORTS OF MERCHANDISE 2 59 

The following conclusions are suggested rel- 
ative to 'Tmports." 

(These figures are also valuable both as a 
barometer of the American demand for luxuries 
and for forecasting money conditions.) 

1. During a Period of Business Depression. 

(a) A normal increase signifies that con- 
ditions are improving, — provided said increase 
does not adversely efifect the balance of trade. 

(b) A decrease signifies the reverse. 

(c) No change signifies nothing of im.por- 
tance provided the exports are likewise constant. 

2. During a Period of Improvement Follozv- 

ing a Business Depression. 

(a) An increase, if not too great, signifies 
that domestic trade is continuing to improve. 

(b) A decrease signifies that economy is 
still being practised. 

(c) No change signifies nothing of impor- 
tance, provided the exports are likewise con- 
stant. 

3. During a Period of Prosperity. 

(a) An increase, especially if abnormally 
large, is a sign of the end of the period of pros- 
perity. 

(b) A decrease tends to lengthen the period 
of prosperit}^ 

(c) No change signifies nothing definite. 



260 BUSINESS BAROMETERS 

4. During a Period of Decline Following a Per- 
iod of Prosperity. 

(a) An increase is an unfavorable sign. 

(b) A decrease signifies that the decline is 
progressing in a healthy manner. 

(c) No change is not a favorable sign. 

Exports of Merchandise From the United 
States 

By exports is meant the goods shipped from 
the United States to any foreign port or coun- 
try. This includes all raw materials, manu- 
factured articles and in fact anything for which 
a resident of the United States receives money. 

The monetary condition of the country de- 
pends on three things : 

1st. The amount of money in the country. 

2nd. The demand for money. 

3rd. The confidence of the people. 

The first item, namely, the amount of money 
in the country, is very dependent upon the ex- 
ports of the country. Technically, this is de- 
pendent upon the balance of trade, a term ex- 
plained in the next section of this chapter, but 
practically it is dependent upon the exports. 

Formerly the amount of exports was depend- 
ent almost entirely upon the amount of raw 
material produced ; that is, wheat, corn, cotton, 



EXPORTS OF MERCHAXDISE 261 

live stock, products,, etc. The condition of the 
main crops of wheat, corn, and cotton, as well 
as that of the smaller crops, such as hay, apples, 
potatoes, etc., determined the exports. With 
small crops the exports were very small, while 
with large crops the exports were large. 

This condition, however, has changed during 
the past eighteen years, in which period there 
has been a very great increase in exports. The 
total exports of the United States have in- 
creased from $500,000,000 to $1,300,000,000, and 
this increase has been almost wholly in manu- 
factured products. In 1890 the United States 
was exporting about $140,000,000 in food pro- 
ducts and raw materials which amount has in- 
creased only to about $165,000,000 in 1908. On 
the other hand, the exports of manufactured 
products have increased from $400,000,000 in 
1890 to nearly $1,100,000,000 in 1908. 

It is important to note the change in the 
proportions between the agricultural and man- 
ufactured exports for, if exports are to depend 
upon manufactured articles rather than on raw 
materials, bread-stuffs, etc., this will tend to 
eliminate the decline in exports which hereto- 
fore have occurred during years of crop fail- 
ures. Andrew Carnesfie savs that the time is 



262 BUSINESS BAR03iETERS 

coming when the greater part of the raw mater- 
ials now forming the bulk of the export figures 
of this country will be used here, and their 
place in export trade will be taken by manufac- 
tured articles. Then the American manufacturers 
can reach the markets of the world and compete 
therein with all the other industrial and com- 
mercial nations. 

If this is so, and the figures for the past 
eighteen years seem to prove it, our exports 
probably not only will continue to increase, but 
the fluctuations will, as above suggested, be 
much less marked- This is another reason why 
we should carefully study the figures on the 
''balance of trade," rather than the figures on 
the ''exports" or "imports" exclusively. 

There is one point in connection with ex- 
ports, however, that the merchant and investor 
should especially remember, namely, that in the 
ordinary course of events, exports continue to 
increase for some time after a period of depres- 
sion begins, although the proportion of exports 
to imports decreases. This is due to the fact 
that the momentum of the energy which in- 
creased production and exports during the per- 
iod of prosperity itself, does not immediately 
lose its force. Moreover, the increase in ex- 
ports usually continues until increased activity 



EXPORTS OF 31ERCHANDISE 263 

at home increases demand and prices, after 
which exports begin to diminish. Therefore, 
during a period of prosperity, a decrease in ex- 
ports is a dangerous sign, as it will tend to ad- 
versely affect the balance of trade. This is also 
true at the beginning of a period of depression, 
but after a period of depression has been ex- 
isting for some time, then a decrease in exports 
is often a favorable sign, as it shows that home 
consumption is increasing; therefore the neces- 
sity of systematically tabulating the monthly -fig- 
ures on exports. Neither these -figures, how- 
ever, nor the figures on imports need to he 
plotted. 

T\Iany merchants when studying foreign trade, 
instead of considering exports and imports sep- 
arately, add them together and call their sum 
the volume of trade. This figure is valuable as 
a barometer of general business activity. It 
should not be confused with the balance of trade 
which is the difference between exports and 
imports and is watched by bankers for its effect 
upon the money rates and gold supply. 

The following conclusions are suggested rel- 
ative to ''Exports" and also relative to "Vol- 
ume of Foreign Trade" : 

(These figures are also valuable as a barom- 
eter of foreign trade conditions and for fore- 
casting money rates.) 



264 BUSINESS BAROMETERS 

1. During a Period of Business Depression. 

(a) An increase signifies that conditions are 
improving. 

(b) A decrease signifies continued dullness- 

(c) No change signifies that conditions are 
at a standstill. 

2. During a Period of Improvement Follow- 

ing a Business Depression. 

(a) An increase signifies that the improve- 
ment in conditions is progressing satisfactor- 
ily. 

(b) A decrease signifies that the improve- 
ment has been temporarily checked. 

(c) No change signifies nothing definite. 

3. During a Period of Prosperity. 

(a) A great increase calls for caution. 

(b) A decrease signifies that a decline may 
be expected. 

(c) No change signifies nothing definite. 

4. During a Period of Decline Following a 

Period of Prosperity. 

(a) An increase calls for caution. 

(b) A decrease is normal. 

(c) No change calls for further study. 

Balance and Volume of Trade 

One of the most im.portant of the subjects 
that investors and merchants study when an- 
alyzing present conditions and forecasting future 



BALANCE OP TRADE 265 

conditions, is the balance of trade. When we 
have sold to foreign merchants raw materials 
or merchandise greater in value than that which 
they have sold to ns, the balance of trade is 
said to be in favor of the United States as 
against foreign countries. This naturally re- 
sults in the shipment to America of gold, to 
adjust the balance, or the selling in the United 
States of "exchange" at a discount, if the con- 
dition is but temporary. The balance of trade 
does 71 ot akvays determine the debtor country, 
as there are other factors to be considered, but 
as a rule this is the case. 

The "other factors" above referred to, are 
such factors as the sale of American securities 
abroad or the payment of interest by the United 
States and corporations therein to foreign se- 
curity holders. Although from the bond deal- 
er's point of view it is very advantageous to have 
a large and wide foreign market for American 
securities, thus leaving so much more "home" 
money free for investments, yet it must always be 
remembered that each year it may be necessary 
to ship gold from the United States to pay the 
interest on these securities and that eventually 
gold must be shipped to pay the securities them- 
selves. Moreover, the amount of gold exported 
during the year that these securities are paid or 



266 BUSINESS BAROMETERS 

v/hen at any time before they are due the for- 
eign dealers decide to sell them, will nullify the 
good of a certain portion of the trade balance 
in our favor for that year. 

7/ trade balances were dependent zvholly on 
the exports and imports of raw material, mer- 
chandise, etc., it zvould be unnecessary for mer- 
chants and investors to independently tabulate 
monthly figures showing the balance of trade 
in addition to tabulating monthly figures on 
exports and imports. Ozving, however, to these 
additional factors, caused by the sale of securi- 
ties, payment of interest, etc., it is necessary to 
tabulate independently figures on "Trade Bal- 
ances-" 

Certain merchants when tabulating figures on 
the balance of trade, which is the difference be- 
tween the exports and imports, also tabu- 
late figures showing the sum of the exports and 
im.ports or what is known as the '"volume." This 
is vv holly unnecessary vvhqii the imports and 
exports have been tabulated separately, but 
rather is of use simply as a short-cut to avoid 
the necessity of tabulating both imports and ex- 
ports separately* Therefore, figures on im- 
ports, exports and the Balance of Trade, zvhen 
tabulated each month serve as a zvonderful ba- 
rometer for discerning present conditions and 



BALANCE OF TRADE 267 

for forecasting future conditions. Moreover^ 
any other figures are zvholly superfluous. 

Although the foreign trade statistics of other 
countries when properly compiled for compar- 
ative purposes are of interest to those studying the 
conditions of the United States, such figures are 
not conclusive in comparing the trade of two 
different countries. As there is no uniformity 
in the classification in the exports and imports 
of tvvo different countries and as the methods 
of valuation are also entirely different, it is very 
dangerous to make comparisons between the va- 
rious countries. This is discussed very clearly 
in an article on the "Comparatability of Trade 
Statistics of Various Countries" by Sir A. E. 
Bateman, C. M. G., published by the American 
Statistical Association, New Series "1893" Vol. 
3' psge 533. 

The following conclusions are suggested rel- 
ative to the "Balance and Volume of Trade." 

(This is on the assumption that the balance 
is in favor of the country being studied. These 
figures have special values in judging the course 
of money rates.) 
I. During a Period of Business Depression 

(a) An increase signifies that money rates 
are to become lower. 

(b) A decrease signifies the reverse. 



268 BUSINESS BAROMETERS 

(c) No change signifies that money rates 
will depend wholly on domestic demand. 

2. During a Period of Improvement Follozv- 

ing a Period of Depression. 

(a) An increase signifies that money rates 
may continue to be low. 

(b) A. decrease signifies the reverse. 

(c) No change signifies that money rates 
will depend wholly on domestic conditions. 

3. During a Period of Prosperity. 

(a) An increase signifies that mioney rates 
should not become stringent. 

(b) A decrease signifies higher money rates 
and a large decrease signifies the end of the 
period of prosperity. 

(c) No change signifies nothing of im.por- 
tance. 

4. During a Period of Decline Follozving a 

Period of Prosperity. 

(a) An increase signifies that lower money 
rates may be expected. 

(b) A decrease signifies the reverse. 

(c) No change signifies nothing of impor- 
tance. 

Gold Movements 

"The natural movement of gold divides itself 
readily into four classes. There is in the first 



GOLD MOVE3iENTS 269 

place the primary movement from the mines to 
the distribution centers, London for the Euro- 
pean markets and New York and Seattle for 
the United States. After that comes what might 
be called the first distributive movement where 
the gold arriving, for instance, at London, is 
sold to the highest bidder, often representing 
far off countries. A readjustment movement 
follows where gold, for instance, purchased by- 
Paris in London is sent on to Switzerland, Italy, 
or Belgium or any other points. Lastly there 
is a constant flow of gold from one part of the 
world to another, the movement which is due 
to the ancient causes of supply and demand, of 
trade and other balances to be paid, and of 
bank reserves to be built up or released. 

Whatever schemes of international gold cer- 
tificates or of an international clearing house 
may be proposed by financial economists for the 
purpose of reducing the gold movement, there 
can never be any question as to the necessity 
of the primary movement from the mines to 
the distributive centers. Roughly speaking, the 
world's gold production originates in three great 
sections. South Africa, Australia and the United 
States. From the former comes almost half of 
the gold mined in the world each year, and 



270 BUSINESS BAROMETERS 

therefore bankers and merchants tabulate the 
monthly production of the Rand Mines. 

The great distance of these localities from 
any important financial market and the fact 
that most of the stock of the South African and 
Australian gold mines is held in England, makes 
London the point to which the product of those 
mines is naturally sent, so that nearly one-half 
of the world's annual production of gold comes 
into the London market for distribution. 

A.rrivals of gold consigned to the London 
agents of the South African and Australian 
mines are fully advertised and what amounts to 
a regular auction is held every time a consign- 
ment arrives. The Bank of England is always 
ready (must be, by law) to purchase all gold of 
standard fineness offered to it, at yj shillings 
9 pence per troy ounce. But very rarely does 
the bank, or anyone else, secure bullion at this 
price. Usually the bidding of the representa- 
tives of the various banks puts the price well 
above that figure." 

London is the one free gold bullion market of 
the world. As the metal arrives from the mines 
it is sold to the highest bidder without fear or 
favor. But this process must not be confused 
with the gold m.arket maintained by the Bank 
-of England. L'sually the bank will sell gold 



GOLD MO\lEMENTS 271 

bars at a price, but sometimes it will not, and 
then the cry goes up that London is no longer 
a free gold market. As a matter of fact, the 
Bank of England is far from being a free gold 
market, but the open market is free and as long 
as there is any gold com.ing in the highest bid- 
der gets it. 

In this country on account of our entirely 
different currency law, there is no bullion mar- 
ket at all, free or otherwise, and the primary 
movement is direct from the mines to the assay 
offices, v/here a fixed and unvarying price is paid 
for it. In other words, all the gold produced in 
this country immediately passes into its circu- 
lation. There is no long trip to an open mar- 
ket, and then an apportionment to all parts of 
the Vv^orld. The owner of the gold takes it to the 
nearest government assay office, where it is as- 
sayed and bought from him at so much per 
ounce. Afterwards if anyone needs gold bul- 
lion, for export or other purposes, he can ob- 
tain it at the treasury at a fixed price, as long 
as the supply holds out. 

The very fact that there is a primary move- 
ment of gold from the Australian and South 
African mines to London, makes necessary the 
distributive move to the various markets whose 
representatives at the British capitol have been 



272 . BUSINESS BAR03^IETERS 

sticcessful in their bidding for this new supply. 
But even after that comes another movement, 
for the smaller markets are not directly represent- 
ed in London, but must obtain the supplies of gold 
they need through their important correspon- 
dents. 

These three movements carry the gold from 
the place where it is mined to the lesser bank- 
ing centers, where its distribution is complete. 
But the movement of the metal by no means 
com.es to an end w4th its distribution. There 
follows a fourth movement, dependent entirely 
upon financial conditions, the movement which 
will often result in the practical transfer of all 
or part of some firmly established gold supply 
to some distant market. 

There are three prime influences which bring 
about such movements. The Urst is the neces- 
sity of making international payments for mer- 
chandise or securities at times when exchange 
is scarce; the second has to do with the main- 
tenance or restoration of bank reserves which 
can at times be accomplished only by the out- 
right purchase of gold in other countries ; the 
third is due to international operations where 
bankers are anxious to transfer large balances 
from one point to another, and not finding ex- 
change available in quantity, send gold instead. 



GOLD MOVEMENTS 273 

From the very nature of these causes it will 
readily appear what a mistake it is to imagine 
that the development of our international fi- 
nancial relations will eventually make it neces- 
sary to ship gold at all. Only one of them, the 
first, could possibly be affected by the arrange- 
ment of a system of international credits. These 
large payments by one country to another, such, 
for instance, as the payment for the Panama 
Canal or the payment to us of the San Fran- 
cisco fire indemnity, continually have to be 
made, and often under circumstances and at 
times when it is impossible that there should be 
a sufficient amount of exchange available. It is 
hard to see how, even if an international sys- 
tem of crediting and debiting should be ar- 
ranged, payments of this kind could eventually 
be settled by remittances of gold or exchange, 
and as for gold shipments arranged for the 
building up or maintenance of bank reserves, 
it Yv^ill appear that, as the bankers of different 
countries become more closely allied, the inter- 
change of gold is greatly facilitated. Through 
various causes the gold reserve of the banks, 
particularly the great national banks of Eu- 
rope, becomes depleted at times, and then these 
institutions are apt to call upon their foreign 
connections to send them the gold they need. 



274 BUSINESS BAR03IETEIIS 

The other reason which makes gold, often 
apparently a settled reserve, move from one 
country to another is that in the highly devel- 
oped state of the foreign exchange business, bal- 
ances are continually being transferred to the 
points where they can be most advantageously 
used. As long as exchange on the point to which 
the transfer is to be made can be bought that will 
be the form of remittance. But where exchange 
cannot be had gold will be sent, and so it ap- 
pears that the more balances transferred, the 
greater is apt to be the circulation of gold." 

The importing of gold does not necessarily 
mean ''good times'' nor even "lozver money rates" 
nor the exporting, the approach of a crisis; ne- 
vertheless important deductions may he made if 
monthly figiircs are systematically collected and 
tabulated thereon. These deductions have been 
summarized by Burton as follozvs: 

''Every country will, under normal conditions, 
have a certain share of the gold or primary sup- 
ply of the world. The different countries have 
been compared to reservoirs of water, of various 
sizes, connected by pipes. All the reserv^oirs will 
maintain the same level. The share of each 
country is determined primarily by its wealth. 
There is a tendency for metallic money, which is 
a form of wealth, to maintain in every country 



GOIiD MOVEMENTS 275 

a fixed proportion to other forms of wealth. 
But the share of each is affected by the vokime 
of its trade and other incidental circumstances, 
among which are established methods of trans- 
acting business, the habits of its people, and, 
notably, its currency system. The cur- 
rency system affects the gold supply. 
Paper money displaces gold, and causes it to 
be sent elsewhere in a less or greater propor- 
tion, according as it is absolutely based upon a 
deposit of gold, is redeemable in gold on pres- 
entation, or is not redeemable at all. 

Methods of transacting business influence the 
supply. Where balances are largely settled at 
clearing houses, and checks generally employed^ 
less currency and less gold are required. In 
this particular, the contrast betwen England and 
France is very marked. The latter country 
makes less use of clearing houses and checks 
and accordingly requires a larger supply of gold 
and silver, the latter m.etal being extensively 
used. 

The habits of the people exercise an impor- 
tant influence. After the Franco-Prussian War 
it was found that the French peasant proprie- 
tors had hoarded large sums of gold. In the 
great emergency created, these amounts v\Tre 
brought out and assisted in the payment of the 



276 BUSINESS BAROMETEIRS 

indemnity. Frequently when native grandees 
m India die, it appears that they have been ac- 
cumulating a great stock of gold, much of it 
in the form of ornaments, which for years has 
been kept out of circulation. All this hoarding 
tends to increase the demand on the gold which 
is in circulation as money. The peasant, or 
grandee who hoards, causes so much of the 
world's capital to lie idle. The benefit accruing 
in time of crisis or emergency to countries in 
which quantities of gold are withheld from gen- 
eral circulation, is obtained at the cost of di- 
minished activity and volume of business under 
ordinary conditions. 

M. Paul Le Roy-Beaulieu quotes figures to 
show that France in 1885, had a circulation of 
metallic m.oney amounting to 215 francs per cap- 
ita ; England and the United States had, re- 
spectively, 86 and 68 francs per capita. Of 
course if the quantity of coin in circulation had 
been based upon per capita w^ealth at the time, 
England would have shown the largest quan- 
tity per capita, France next and the United 
States last. 

There is then a normial share of gold which 
belongs to each country. If any country has 
more than its share, it will export. It is easy 



GOLD MOVEMENTS 277 

to recognise that from a gold producing coun- 
try, such as Australia, South Africa or Alaska, 
the greater part of the gold mined will be ex- 
ported. Likewise, if gold is held in any one 
country, in such quantity that it can be invested 
elsewhere more advantageously, either in loans 
or in purchases, or can be sent abroad in pay- 
ment of debts, it will be exported. If it is in- 
vested in loans abroad, it is an indication of 
surplus capital, and makes a favorable showing. 
If invested in purchases at low prices, it shows 
ability to draw upon other countries for an in- 
creasing share of objects of utility. If the pur- 
chases show that home prices are higher than 
foreign, and a supply of things usually obtained 
at home must be obtained abroad, the export of 
gold is a sign of danger. Thus an important ques- 
tion in determining the shipments of gold, is 
the nature of the purchases or investments to be 
m.ade with it. 

The specie exports and imports of this coun- 
try have furnished distinct indications prior to 
each period of disturbance, but their significance 
cannot be understood without an examination 
not only of our general situation, but also of the 
particular situation at different times." 

Of the various circumstances under which ex- 
cess of exports of gold indicate the approach of 
a crisis, may be mentioned the following: 



278 BUSINESS BAROMJETEKS 

''First, when gold is required for purchases 
abroad which are made at high and rising prices. 
This indicates overaction and concurs with un- 
usual increase in the prices of domestic supplies. 
Especially is this true, if in a time of rising 
prices, gold is exported for commodities usually- 
supplied by domestic production. Such a condi- 
tion cannot long continue without a reaction 
and an ensuing depression. / .-The 'indications 
which are significant in connection with the im- 
ports of merchandise apply to the exports of 
gold. On the other hand, the export of gold 
for purchases, when prices are low, is not an 
imfavorable condition. It indicates purchases 
upon advantageous terms. 

Second, when the export of gold is attended 
by a scarcity of money and a marked increase 
in the rate of discount, it is a decidedly un- 
favorable indication. This is of the same kind 
as those indications noticed in the conditions of 
banks. A steady increase in the rate of discount, 
or a decrease in the supply of gold, is a sure 
precursor of a crisis. The only question is how 
long this condition can continue without a crash. 

Third, an unusual balance of exports of gold, 
not explained by surplus production, continued 
for a considerable time, or a sudden withdrawal 



GOLD MOVEMENTS 279 

of large amounts is one of the most unfavorable 
conditions. It is to be noted that there is an 
exceptional sensitiveness in financial centres on 
the subject of gold exports, and sometimes an 
entirely normal export is interpreted as meaning 
instability and destroys confidence when there 
is no need for distrust. 

It should be added that, when for a succession 
of years gold is withdrawn from circulation by 
reason of the substitution of inconvertible paper 
as money, the conditions which exist are sure 
to vary from normal lines. Credit will rest 
upon a false basis and the inevitable tendency 
will be towards an increase in the quantity of 
paper money outstanding and a dangerous ex- 
pansion of credit. 

In many respects the phenomena of a balance 
of gold exports are similar t o those arising 
from a balance of merchandise imports. The 
two are expected to appear contemporaneously, 
but in essential particulars they are different. 
Some differences depend upon the question of 
gold production. 

In countries like South Africa and a portion 
of Australia, where gold mining is the leading 
industry, gold exports are naturally classed with 
merchandise exports, and an export is a favor- 
able indication. In non-producing countries like 



280 BUSINESS BAROMETERS 

England and France, where gold is in demand 
principally as money, imports are a favorable 
indication. There is another difterence in a 
noticeable tendency towards contemporaneous 
decline in gold reser\^es in all the great financial 
centres. That which is lost in one country' is 
not gained in another. This decline is explained 
by the withdrawal of considerable amounts to be 
hoarded or retained in circulation outside of the 
banks, and to some extent to the transfer of 
gold to the countries outside of the most ad- 
vanced industrial and commercial circle. The 
influences which cause gold to be hoarded or re- 
tained in circulation outside of the banks are 
not unlike those which aflFect the circulation of 
paper money. International credits or pay- 
ments frequently cause an excess of gold im.- 
ports in a country to coincide with an excess 
of imports of merchandise. Again, a large de- 
mand for money, manifesting itself in high 
rates of interest, may cause gold to be retained 
in a country contemporaneously with an unusual 
balance of imports." Therefore bankers and 
mxerchants systematically collect and tabulate 
monthly figures on "Gold ]Movements-" 

The following conclusions are suggested rel- 
ative to "Gold Movements'': • 



GOLD MOVEMENTS 281 

Large or long continued gold exports are al- 
ways unfavorable signs and gold imports are 
always favorable signs. The following sugges- 
tions refer especially to exports. 

1. During a Period of Business Depression. 

(a) An increase always calls for caution, as 
it forecasts an increase in money rates and pos- 
sibly the calling of loans. 

(b) A decrease is always favorable, as i*" 
forecasts lower money rates. 

(c) No change is dangerous or favorable 
according to whether gold is being exported or 
imported. 

2. During a Period of Improvement Following 

A Period of Depression. 

(a) An increase always calls for caution as 
it forecasts an increase in m.oney rates and pos- 
sibly the calling of loans. 

(b) A decrease is always favorable, as it 
forecasts lower money rates. 

(c) No change is dangerous or favorable, 
according to whether gold is being exported or 
imported. 

3. During a Period of Prosperity. 

(a) An increase is especially dangerous and 
if continued over a long period often foretells 
the end of the period of prosperity. 



282 BUSINESS BAROMETERS 

(b) A decrease is always more favorable 
than an increase, but any exportation of gold 
should be considered as unfavorable. 

(c) The same reasoning applies to "no 
change." 

4. During a Period of Decline Follozving a 
Period of Prosperity. 

(a) An increase is still dangerous after the 
turn and if continued may precipitate a panic. 

(b) A decrease is the normal result of a de- 
crease in activity. 

(c) No change is dangerous or favorable 
according to whether gold is being exported or 
imported. 

Foreign Money Rates & Foreign Exchange 

These two subjects are usually discussed to- 
gether, first because they are * co-related and 
second, because the subject of foreign money 
rates of itself is not sufficiently important to 
be treated independently. All that need be said 
as regards foreign money rates is that money, 
like water, seeks its own level, unless artificially 
held or forced. Therefore, if money rates are 
low in the United States, but for some time have 
been high in England, Germany or France, mon- 
ey rates in the United States are sure to soon 
increase, the increase to be followed possibly 



FOREIGX MONEY RATES 283 

by a period of stringency. There are two reas- 
ons for this : first, the loans to American bank- 
ers, by foreign bankers will be called for pay- 
ment, or else the foreign rate will so be raised 
that it w^iU be more profitable for the Americans 
to borrow at home ; and second, foreign bank- 
ers will begin to borrow from America and thus 
take advantage of the lower American rates. 
As both of these causes are in operation at the 
same time, the rates very soon equalize; the 
foreign rates declining and the American rates 
increasing. The converse of this principle is 
also true. When the money rates in America 
are high, but the foreign rates have been low 
for some months, the tendency is for the Amer- 
ican rates to decline and the foreign rates to in- 
crease. 

IVhen tabulating foreign rates, investors and 
merchants consider only the ^'rate of discount'^ 
of the three leading foreign hanks; namely, the 
Bank of England, the Bank of France and the 
Bank of- Germany. The tahidation and the in- 
terpretation of these rates is very simple, es- 
pecially as the three rates are usually added and 
averaged, thus necessitating the use of only one 
table. The American merchant always keeps in 
mind, however, that low foreign money rates 



284 BUSINESS BAROMETERS 

have their disadvantages as well as their advan- 
tages, as very often they signify a low condition 
of foreign trade which, during certain periods, 
may Be spread to America. 

The changes in the Bank of England rate in 
recent years have been as follows : 

Jan. 14,1909 3 Apr. 25,1907 4 Mar. 9,1905 2iJune 13, 1901 3 

May 28,1908 2^Apr. 11,1907 4^Apr. 21,1904 3june 6, 1901 3i 

Mar. 19, 1908 3 Jan. 17, 1907 5 Apr. 14, 1904 3§Feb. 21, 19014^ 

Mar. s, 1908 3iOct. 19, 1906 6 Sept. 3, 1903 4 Feb. 7, 1901 4i 

Jan. 23,1908 4 Oct. 11,1906 5 June 18,1903 3 Jan. 3,1901 5 

Jan. 16,1908 5 Sept. 13,1906 4 I\Iay 24,1903 3ijuly 19,1900 4 

Jan. 2,1908 6 June 21,1906 3iOct. 31,1902 4 June 14,1900 3 

Nov. 7, 1907 7 Alay 3, 1906 4 Oct. 2, 1902 4 May 24, 1900 3i 

Nov. 4, 1907 6 Apr. 5, 1905 3iFeb. 3, 1902 3 Jan. 25, 1900 4 

Oct. 31,1907 siSept. 28, 1905 4 Jan. 23,1902 3iJan. 18,1900 4^ 

Aug. 15, 1907 4iSept. 7, 1905 3 

Referring again to the figures, foreign money 
rates, as affecting American money rates through 
the transferring of gold, are affected only by 
the purchase and sale of foreign exchange- 
Therefore, although merchants usually study 
only foreign money rates with their common 
knowledge of foreign exchange, yet theoretically, 
a study of foreign exchange will in itself suffice. 

Foreign is quoted both as to "actual rates" 
and as to '^quoted rates" and for a general de- 
scription of the subject we quote Howard Irving 
Smith as follows : 

"The quotation 'actual rate' means the rate at 
which exchange is sold in large amount by the 
dealer ; the quotation 'posted rate' means the 



FOKEIGX MONEY RATES 285 

preliminary asking rate of the day before an 
actual rate is made and this is the rate usually 
exacted for a small amount of exchange by a 
dealer. The actual and posted rates are the 
rates at which dealers sell bills of exchange 
issued by themselves. They do not, as a rule, 
announce the rates at which they will buy com- 
mercial bills of exchange ; that is a matter of 
negotiation and depends on the nature of the 
bills. The newspapers, however, publish ap- 
proximate prices for commercial bills. 

Foreign exchange is payable in the money of 
the country upon which the exchange is drawn, 
that is, where the exchange is payable. The 
equivalent of $i.oo in English money is 
49.3 pence or four shillings 1.3 pence. 
When foreign exchange is quoted i n the 
m.oney of the country where it is bought, the 
unit of the money of the country where payable 
is figured at so much money of the country where 
the bill is issued. Thus, when sterling exchange 
is quoted at $4-8665, £1 in exchange is worth 
$4.8665. 

When foreign exchange is quoted in " money 
of the country v/here it is payable (not where 
it is bought) the unit of money of the country 
where it is bought is figured at so much in 



286 BUSINESS BAR03IETERS 

the money of the country where the bill is pay- 
able. Thus, when exchange on France is quoted 
at 1 8 (5 francs, 18 centimes) $1.00 in ex- 
change is worth 5.18 francs. 

When a bill of exchange is quoted in the 
money of the country in which it is issued, but is 
pa3^able (is to be paid) in the money of the 
country upon which it is drawn (where it 
is payable), the higher the quotation, 
or rate, the higher is the cost of such ex- 
change for the reason that a high rate requires 
more of the money of the country where the bill 
is purchased to buy a given amount of the money 
of the country where the bill is payable than a 
low rate requires. 

On the other hand, when a bill of exchange 
is quoted in the money of the country upon 
Avhich it is drawn (which is also the money 
in which it is to be paid) as francs, the higher 
the quotation the less the cost of such exchange 
for the reason that more (in the foreign coun- 
try's money) can be purchased for $1.00 at a 
high rate than can be purchased at a low rate. 

Illustration : If exchange for ^i is purchased 
for $4.89 it costs more than if purchased at 
$4.84. On the other hand, if exchange for 25 
francs (5 francs, 25 centimes) is purchased 



FOilEIGN MONEY RATES 287 

for $i.oo it costs less than if $i.oo is paid for 
511 francs; or, putting it the other way, $1.00 
buys more in francs at the high rate than it 
does at the low rate. 

The amount paid for a time bill depends on 
the length of time it is to run and the rate of 
interest prevailing in the country where the 
bill is payable. A commercial bill payable in 
London three months after date, is bought by 
a dealer in exchange in New York at a price 
which is equal to a bill payable on demand, 
less than three months' interest at the existing 
rate of interest in London. The London rate 
of interest serves as the basis in calculating 
the price of the bill for the reason that the bill 
is payable in London and to make it equal to 
a draft payable on demand it must be discount- 
ed in London. 

High cost for exchange ordinarily means that 
the international balance is against the country 
where the high cost prevails ; conversely, low 
cost for exchange ordinarily means that the in- 
ternational balance is in favor of the country 
where the low cost prevails." Hoivever, as all 
of this may be ascertained by a study of for- 
eign money rates, it is unnecessary for the 
merchant to collect or tabulate figures on for- 
eign exchange. 



288 BUSINESS BAR03IETERS 

"The fact is that, so far from financial panics 
being confined to the United States in 1907, a 
really formidable credit crisis occurred that year 
in at least four foreign cities situated in four 
separate continents ; two of these markets being 
wholly unconnected in a financial way with the 
United States ; and the financial collapse occur- 
ring in two of them before, the panic broke out 
in our country in October 1907. As early as 
May, 1907, bank failures, hoarding of money 
and very general suspension of credit facilities 
were witnessed in EgA^pt, and London was 
hurrying along emergency shipments of gold to 
Alexandria, exactly as it hurried along the gold 
shipments to New York about six months later- 
At nearly the same time, bank failures and pan- 
icky conditions on the markets were happening 
in Japan. In almost every week of our own Octo- 
ber crisis, and on yet another continent, the pow- 
erful Banco ]\Iobiliario of Valpariso suspended 
payments, credit came to a halt in Chile, the 
currency sank to a low level of depreciation, and 
the Chilian Government was forced to take 
measures of relief. Again almost simultan- 
eously with our own crisis, panic broke out in 
Hamburg, Germany, carrying down two great 
commercial houses and leading financial ex- 
perts on the spot to pronounce the crisis the 
worst Hamburg had witnessed since 1857. 



FOREIGN MONEY RATES 289 

I hardly need add to this list such other 
minor crises as the temporary breakdown in 
credit in Genoa in the middle of 1907 and the 
panic at Copenhagen, a few months after our 
own, which compelled the Danish Government 
to come to the rescue by guaranteeing the as- 
sets of banks then subject to a run by deposit- 
ors. What this part of the history of 1907 con- 
clusively proves is that financiers and historians 
must look elsewhere than to American legislation 
and American banking for the cause of that 
year's panic. European economic experts have 
not found it difficult to assign the cause; it 
was indeed pointed out by the eminent Paris 
economist, M. Leroy Beaulieu, even before the 
panic came. 

That cause was the exhaustion, in a violent 
world-wide industrial expansion and an even 
more world-wide speculation, of the world's ac- 
cruing capital resources, and a consequent 
strain on credit which, throughout the fi- 
nancial Vv^orld, approached the breaking point. 

With such a tension in the international 
chain of credit, the break was bound to come, 
either where the link was weakest or where the 
strain was greatest. The link was weakest in 
Chile and Egypt while the strain was incal- 
culably the greatest in the United States, where 



2^.0 BUSINESS BAROMETERS 

Speculation of an unheard of rashness and 
magnitude had been raging for two years, 
although had foreign conditions been sound, 
the break would not have then occurred in the 
United States. The severity of the shock in 
all these localities, and the world-wide liquid- 
ation and reaction, in both finance and commerce 
which have followed and which still prevail, in 
Europe, Asia, Africa and South Am.erica, as well 
as in this country, were the logical and inevit- 
able outcome." Therefore the necessity of study- 
ing foreign conditions and not simply conditions 
in only one country, is apparent. 

The following conclusions are suggested rel- 
ative to " Foreign Money Rates." 

These figures are also of special value in 
judging the course of domestic rates. 
1. During a Period of Business Depression. 

(a) An increase in foreign money rates 
signifies that conditions are becoming disturbed 
abroad, that foreign rates are increasing; and as 
foreign bankers will either mark up or call the 
loans which they hold of American firms, this 
will increase the home demand for m.oney and 
domestic rates will strengthen. 

(b) A decrease signifies the reverse. 

(c) No change means normal conditions. 



POIilTICAli FACTORS 291 

2. During a Period of Improvement Following 
a Period of \Depressio7i. 

(a) An increase in foreign money rates or in 
foreign exchange usually forecasts higher dom- 
estic money rates. 

(b) A decrease signifies the reverse, pro- 
viding all other factors remain the same. 

(c) No change means normal conditions. 

3. During a Period of Prosperity. 

(a) An increase in money rates or in foreign 
exchange usually forecasts higher dom.estic 
rates. 

(b) A decrease signifies the reverse, pro- 
viding all other factors remain constant. 

(c) No change means normal conditions. 

4. During a Period of Decline Following a 
Period of Prosperity. 

(a) An increase in foreign money rates or in 
foreign exchange usually forecasts higher do- 
mestic money rates. 

(b) A decrease signifies the reverse, pro- 
viding ail other factors remiain constant. 

(c) No change means normal conditions. 

Political Factors 
Somie of the m^ost successful merchants of the 
old school always maintained that the three 
greatest factors which influence business con- 
ditions are crops, mioney and politics, and that 



292 BUSINESS BAROMETERS 

of these the most important is the last named, 
politics. Certainly this statement seems justi- 
fied by a study of the story of business condi- 
tions of the United States. And that portion of 
American history with which these pages are 
most concerned, from 1860 up to the present 
time, is most admirably described by Alex. 
Dana Noyes in his " Thirty Years of American 
Finance." 

There has always been a most delicate re- 
lation between politics and the state of trade. 
Almost every period of depression and period of 
prosperity, although not wholly due to political 
conditions, has been greatly augmented by 
them. Among those various political factors 
may be mentioned the following:— 

The " Embargo act " in the early part of the 
century. 

The war of 1812. 

The establishment of the United States Bank. 
-, The discontinuance of the United States 
Bank. 

The beginning of *' state rights " discussions. 

The slavery discussion. 

The Civil War. 

The *' Reconstruction acts." 

The inflation of the currency. 

The " Resum.ption Act." 



POLITIC Ali FACTORS 293 

The silver coinage law. 

The resumption of specie movements. 

The circulation of silver certificates. 

The radical measures under Pres. Arthur, 
followed by the panic of 1884. 

Campaign and election of the Republican 
Party in 1888, coincident with the period of 
prosperity. 

The silver purchase act and the great gold 
exportations followed by the panic of 1893. 

The tariff legislation of the '90s followed by 
the prosperous conditions of 1900. 

The various Bryan scares. 

President Roosevelt's campaigns against the 
trusts. 

Of all these various acts, the most dangerous 
were those affecting the currency and the tariff. 
Both of these are very sensitive questions. 
Any change in the money standard or banking 
system, especially if it disturbs either foreign or 
domestic confidence, is very destructive to the 
commercial prosperity of the country. Even 
when banking questions or the money standard 
are discussed in Congress, there seems to be an 
immediate division of interests between the 
producer or the manufacturer and the banker 
or investor. The legislation desired by the 
producer seems to be opposed by the investor 



294 BUSINESS BAROMETERS 

and vice versa. The reason for this is very 
evident, as anything which tends to make 
money easier to the producer, depreciates the 
value of money in the hands of the bankers 
and investors who possess it. On the other 
hand, legislation which strengthens the im.- 
portance of the banker and investor, tends to 
handicap the producer and manufacturer. 

Any legislation designed to reorganize th^ 
banking system of the United States on any- 
thing but a gold basis, as the banking system.s 
of England and other countries are founded, 
always retards trade. Any legislation which 
gives any additional importance to gold is al- 
ways greeted with approval by all classes of 
manufacturers, merchants and investors, ex- 
cept those holding Government bonds. All 
other legislation, especially that recognizing 
as a standard silver or anything other than gold, 
is always a dangerous sign, often causing bankers 
and investors to call loans and raise rates. 
Such conditions usually precede a general crisis. 

As to the propriety of high or low duties on 
foreign goods, this is an open question and 
leading economists are found on both sides. 
Although nearly all bankers are in favor of pro- 
tection, yet miost economists, on whose advice 
the bankers depend regarding all other matters. 



POLITIC Ali FACTORS 295 

are almost without exception against protection ; 
but whether high tariff for protection or low 
tariff for revenue only, is best for the country, 
the fact remains that whenever the subject is 
discussed and whenever there is to be a change 
in classifications or duties, this discussion and 
legislation has always affected business con- 
ditions. Moreover, although the adoption of 
certain tariff legislation has given a great 
impetus to prosperity, yet the previous dis- 
cussion of the subject has always tended to 
disturb confidence, promote a feeling of un- 
certainty and seriously check business. 

This is very well described by Henry Hall 
as follows: — 

" In the United States the business world has 
become accustomed to the protective principle; 
and even the prospect of reduced duties has 
alv/ays chilled the spirit of enterprise, while the 
reality has always given a set back to business, 
sooner or later. On the other hand, enactment 
of protective tariff, in lieu of one for revenue 
only, has always proved exciting and has quick- 
ened into intense activity the looms, forges 
and machinery of the entire country. 

The backward state of American industry 
prior to the Civil War is held to have been due 
in large m^easure to the relaxation of protection 



296 BUSINESS BAROMETERS 

under the tariff laws of 1842 and 1857. There 
can be no question, that the twenty or more 
tariff enactments from 1861, when the Morrill 
protective tariff went into operation, to 1872 
when the system had been fairly adjusted to the 
requirements of home industry, aided materially 
in developing the mines, sustaining the fac- 
tories against foreign competition, supplying 
the railroads with an immense and profitable 
traffic, and promoting the farming interests of 
every section of the States. 

The lower duties of 1883 on many manufac- 
tures added to the force of other evil influences, 
w^hich ended in the crisis of 1884. The crisis 
of 1893 rose in a distinct measure from the 
agitation in the then Democratic Congress 
for a tariff for revenue only, which eventuated 
in the Wilson bill. The prosperity which the 
States now enjoy must be attributed in a 
marked degree to the protective tariff, enact- 
ed under President McKinley. 

All writers on crises agree in giving great 
weight to tariff changes. An investor should 
therefore at all times be fully informed with 
regard to such actual or possible revolutions 
in poHtical control at Washington, as are likely 
to have a bearing on the tariff laws." 



POLITICAL FACTORS 297 

Therefore successful hankers, merchards and 
investors always carefully watch political con- 
ditions a7id if possible reduce them to a decimal 
or barometer index number. 

The following conclusions are suggested rel- 
ative to " Political Uncertainties." 

(This assumes all political factors to be un- 
favorable and the best conditions to be when 
only routine business is being considered. 
However, there are times when certain political 
acts are distinctly favorable and then the reverse 
of the following conclusions should apply.) 

1. During a Period of Business Depression. 

(a) An increase in political agitation is 
always unsatisfactory. 

(b) A decrease is always welcomed. 

(c) No change is unfavorable or favorable 
according to whether or not any important 
measure is under consideration. 

2. During a Period of Improvement Fol- 
lowing a Period of Depression. 

(a) An increase in political agitation is 
always unsatisfactory. 

(b) A decrease is always welcomed. 

(c) No change is unfavorable or favorable 
according to w^hether or not any importctnt 
measure is under consideration. 

3. During a Period of Prosperity. 



298 BUSINESS BAROAfETEIlS 

(a) An increase in political agitation is 
always unsatisfactory. 

(b) A decrease is always welcomed. 

(c) No change is unfavorable or favorable 
according to whether or not any important 
m.easure is under consideration. Of course, if 
some legislation is under discussion the enact- 
ment of which would greatly relieve the sit- 
uation, then an " increase " would be distinctly 
favorable, and a decrease distinctly unfavorable. 

4. During cl Period of Decline Follcwing a 
Period of Depression. 

(a) Same as above. 

(b) Sam.e as above. 

(c) Same as above 

Production of Gold 
As to the effect of the production of gold, 
there is a diversity of opinion. That it is a 
subject of great importance when a number of 
years are considered, is admitted by all; but 
many deny that it is of such importance when 
considering a period of only a few years. The 
theory that as the supply of gold, which is used 
as a standard of value and a meduimi of exchange 
increases, it must reduce interest rates and 
increase prices of commodities, is actively 
combatted by m.any authorities. If there w^ere 
no other possible causes at work affecting 



PRODrCTION OF GOLD 299 

interest rates and commodity prices, this theory 
might be taken more seriously; but even then 
it would be obliged to stand the test of experi- 
ence. 

The editor of the Engineering and Mining 
Journal, Mr. Walter R. Ingalls, claims to have 
shown by statistics and graphic diagrams, that 
there has been no correspondence between the 
fluctuations in the gold supply and those in 
prices. Going back to the time of the first 
notable modern increase in gold production, 
he shows that for some years, beginning with 
1851, there was an apparent parallelism, but 
there was a drop in prices after the crisis of 1857 
and then a recovery and increase until 1864, 
though the production of gold was then falling 
off. After that prices decHned until 1870, 
while the gold supply fluctuated within narrow 
limits; but in 1871 prices started up again, with 
gold production declining. During the fall in 
prices after 1873, there was an upward turn in 
the production of gold and by a peculiar per- 
versity, in view of this theory of cause and 
effect, it fell off again after 1879 as prices began 
to rise. The decline in gold production con- 
tinued until 1883 when there was another 
upward turn followed by a continued increase 
until 1896. The out-put was then more than 



300 BUSINESS BAROMETERS 

double that of 1884 and the highest ever reached 
before that time; but during that period there 
was an almost continued decline in comm.odity 
prices, to contrast with the rise which took 
place, while the annual supply of new gold 
again doubled. This may not prove that the 
increased production of gold has had no effect 
upon its commercial value compared with the 
general mass of commodities, and consequently 
upon prices determined by its value as the stan- 
dard of measurement and computation; but it 
does very conclusively refute the theory that 
the two things stand in the close relation of 
cause and effect. There is certainly no close 
correspondence between them from year to 
year and the inevitable inference is that m^uch 
more potent causes, than the volume of gold 
in monetary use, are at work in determining the 
course of prices. 

It is a question whether the demand for the 
use of gold as a basis of credit and exchange 
has not kept pace with the supply and pre- 
vented any absolute depreciation. Mr. Ingalls 
forcibly opposes the argument that the cost to 
capital and labor of producing gold has dimin- 
ished and that available deposits are on the 
increase, with cheapening m.ethods of extraction. 
In connection with the question of increased 
demiand, he takes the increasing production 



PRODUCTION OF GOLD 301 

of pig iron as fairly representing the advance 
made in industries and trade generally and 
shows both by figures and graphic diagrams 
that its increase has been relatively greater 
than that of gold. 

As to the general subject of gold, this has 
best been presented in a book entitled " The 
Story of Gold " by Professor E. S. Meade, 
while the theory that the rise in commodity 
prices is due to the increased production of the 
metal is well described in the book entitled 
" Gold Supply and Prosperity," edited by 
Byron W. Holt of New York City, who is 
generally recognised as one of the best informed 
mien on this subject. Based upon the assump- 
tion that the output of gold is to increase for the 
next ten years at an average rate of not less 
than 5%, Mr. Holt makes the following four- 
teen conclusions: — 

(1). That the value of gold will depreciate 
as the quantity increases, though not, perhaps, 
at the same ratio. 

(2) . That this depreciation will be measured 
by the rise in the average price level. 

(3). That rising prices will soon lead again 
to rising and higher interest rates. 

(4). That, because of high interest rates, 
the prices of bonds and most other long-time 



302 BUSINESS BAK031ETERS 

obligations drawing fixed rates of interest, 
dividends or income will again decline to low 
levels. 

(5). That, because of rising prices and high 
interest rates, the cost of materials and supplies 
will tend to decrease the net profits of all con- 
cerns the price of whose products or services 
either cannot be advanced at all or are not free 
to advance rapidly. 

(6). That, because of rising prices, the net 
profits of all concerns that own their own 
sources of materials and supplies will tend to 
increase. 

(7). That, because of rising prices of com- 
modities, the market prices of all tangible 
property w^ill tend to rise. This includes lands, 
forests, mines, buildings and improvements. 

(8). That, becaue of rising prices of com- 
modities and property, the prices of the stocks 
of corporations holding commodities or property 
will tend to advance. 

(9). That, because of rising prices and, 
therefore, of cost of living, wages must, and will, 
tend to advance. 

(10). That, because wages and salaries w411 
not rise as much or as fast as will prices and the 
cost of living, there will be dissatisfaction and 
unrest among wage and salary earners. 



PRODUCTION OF GOLD 303 

(11). That, because of rising prices and pro- 
perty, there will be much speculation in com- 
modities, stocks and real estate. 

(12). That, because of the great profits that 
will result from speculation, honest industry 
will be discouraged and recklessness and extrav- 
agance will be encouraged. 

(13). That, because rising prices will decrease 
the purchasing power of debts, and thus aid 
debtors at the expense of creditors, they will 
discourage saving and thrift. 

(14). That, then, an increasing output of 
gold m.eans rising prices, rising wages, high 
interest rates, the scaling of debts, speculation, 
unjust distribution of earnings and wealth 
and general dissatisfaction and discontent. 

These conclusions seem to follow each other 
logically, though their close connection is not 
wholly evident. The first two conclusions, 
being the more fundam.ental and important, 
Mr. Holt discusses as follows: — 

" It is almost inconceivable that an increasing 
supply and output of gold, the standard and 
measure of values, will not tend to raise prices. 

It is not asserted that a slight increase in the 
supply will cause prices to advance. The 
natural course of prices, especially of manufac- 
tured goods, is downwards. To offset this 



304 BUSINESS BAROMETERS 

cheapening tendency, due to invention and 
improvement, an increase of perhaps 2% a year 
in the supply of gold may be necessary. To 
offset the growing demand for gold, due to 
industrial expansion, an increase of perhaps 
1% miore a year may be necessary. 

An increase of perhaps 3% a year in the 
world's volume of gold, then, may be necessary 
to m.aintain stable prices. This being true?a 
smaller increase than 3% will result in declin- 
ing prices and a greater increase will result in 
advancing prices of commodities. An increase 
of 5% a year in the supply of gold then w^ould 
cause prices to rise an average of 2% a year, and 
an increase of 8% in the supply of gold would 
cause prices to rise an average of 5% a year."r*' 

As to whether Mr. Holt or Mr. Ingalls, who 
is quoted at the beginning of this paper, is 
correct, the reader miust decide for himself. 
It is very generally admitted that a sudden 
increase in the supply of gold at certain times 
does give impetus to business activity, results 
in the conception of new ventures and indirectly 
is accomxpanied by an advance in prices. This 
rising miovement in prices of itself encourages 
speculation and the extension of credit to a 
dangerous degree. Large profits lead to waste 
and extravagance which conditions are followed 



PRODUCTION OF GOLD 305 

by a crisis and a period of depression. Therefore 
it seems reasonable to admit that the over- 
production of gold is one factor causing in- 
creased prices, indirectly affecting business 
conditions; but it seems illogical to point to 
the production of gold as the only factor or even 
as the most important factor causing increased 
prices. The increase in population, the de- 
struction of natural resources, industrial com- 
binations, labor unions, increased cost of agri- 
cultural land and many other factors tend to 
increase the prices of commodities, as much as 
the over-production of gold. 

Nevertheless, '* Gold Production " is an im- 
portant subject and most careful bankers^ manu- 
facturers and merchants regularly tabulate the 
monthly production of the Rand mines. 

The following conclusions are suggested 
relative to " Gold Production." 

These figures have an immediate bearing on 
all money rates and a distant bearing upon the 
price of all commodities including money. 
1. During ci Period of Business Depression, 

(a) A great increase tends at first to lower 
money rates, although the later effect may be 
the reverse. 

(b) A great decrease tends to increase money 
rates. 



306 BUSINESS BAROMETERS 

(c) No change signifies that money rates 
will be determined wholly by outside conditions. 
2. Durmg cl Period of Improvement Following 
a Period of Depression. 

(a) A great increase tends at first to lower 
money rates, although the later effect may 
be the reverse. 

(b) A great decrease tends to increase 
money rates. 

(c) No change signifies that money rates 
will be determined wholly by outside conditions. 

3. During cl Period of Prosperity. 

(a) A great increase tends at first to lower 
money rates, although the later effect may 
be the reverse. 

(b) A great decrease tends to increase 
money rates. 

(c) No change signifies that money rates 
will be determined wholly by outside conditions. 

4. During d Period of Decline Following 
a Period of Prosperity. 

(a) A great increase tends to lower m^oney 
rates, although the later effect may be the 
reverse. 

(b) A great decrease tends to increase 
money rates. 

(c) No change signifies that mxoney rates 
will be determined wholly by outside conditions. 



BUSINESS BAKOMETFKS 307 

Commodity Prices 

One cannot do better, when studying this 
subject than to refer to Hon. Theodore E. 
Burton's book entitled "Crises and Depressions" 
in which, among other things he states: — 

" In the season of activity w^hich precedes a 
crisis prices rise. This rise begins after the 
worst of the previous depression has been 
reached. Attention has already been called 
to the fact that the rise in prices is unequal in 
different commodities. Iron and steel in their 
various forms, as well as other commodities 
required for construction, and those which 
supply new demands for consumption, show 
the most striking increases. During a depres- 
sion prices of these commodities fall first and 
most notably. The prices of other commodities 
do not fall so much or so early. In the pre- 
ceding season of expansion they do not rise so 
much, and, in their rise as well as in their fall, 
they show, for the most part, only a remote 
effect of the activity or inactivity of the time. 

As is well known it is the tendency of prices 
of iron and steel to reach and pass their max- 
imum some tim^e before the crisis occurs, 
though if the crisis be precipitated by an 
unexpected failure, the interval will be short 



308 BUSINESS BAROMETERS 

or the high prices may continue until the very 
outbreak of the crisis.* 

In the United States, prior to the crisis of 
September 18, 1873, a low price level appeared 
in almost all grades of iron and steel in Jan- 
uary 1871. This was followed by a rapid and 
almost unbroken rise, culminating in the 
months of October and November 1872. A 
maximum price of rolled bar iron, $118.72 at 
Philadelphia, was reached in October, 1872. 
The price fell, with slight fluctuations, to $80.64 
in September 1873, the month of the crisis. 

In the depression which followed the crisis 
of 1873, prices of a majority of the varieties 
of iron and steel were lowest in the latter part 
of the year 1878, though steel rails and stan- 
dard sections of iron rails dropped to a mini- 
mum in the closing months of 1877. The 
month of November 1878 may, however, be 
selected as the turning point. At that date 
No. 1 anthracite foundry pig iron was only 
$16.50 per gross ton, less than one-third the 
price of September 1872. 



*This is why the price of iron is tabulated each month 
— as a barometer for forecasting changes in general busi- 
ness; although — as will be seen from a chart in the earlier 
part of this book — commodity prices do not reach a mini- 
mum until one or two years after the stock market 
reaches its low point. 



COMMODITY PRICES 309 

In the expansion which followed 1878, prices 
reached their maximum in the months of Jan- 
uarys February and March, 1880; but the high- 
est figures were maintained only for a very 
short time. Anthracite foundry pig-iron, 
which had fallen to $16.50 in November 1878, 
rose to $41.00 in February, 1880; rolled bar 
iron to $85.12 in the same month; steel rails 
to $85; cut nails to $5.25 in the months of 
February and March. After the m.onth of 
March, 1880, there was a sharp decline. 
Although interrupted by numerous fluctuations, 
a steady decline began after the closing m-onths 
of the year 1882, and continued until an- 
other minimum was reached in the sum.m.er 
of 1885. The crisis of May 1884, occurred 
in the midst of this downward movement 
and seems to have exerted but little influence 
upon the iron market. Anthracite foundry 
pig iron fell to $17.75 in the months of June, 
July and August of 1885 and then began to 
rise. Rolled bar iron fell to $40.30 in May of 
the same year, and then was quoted at 
$40.32 for the remaining months of the year. 
Steel rails fell to $26 in the month of April. 
•- After the minimum point in 1885 there was an 
upward movement continuing until the early 
months of 1887, the months of February and 



310 BUSINESS BAROfETERS 

March of that year showing maximum prices 
in most varieties of iron and steel; this maximum 
was succeeded by a fall in the prices, which for 
most varieties reached a m.inimum in May and 
June 1889. This minimum was followed for 
a short time by rising prices, which reached a 
maximum in 1890. In the two decades after 
the maximum prices of 1880 the trend of prices 
dififered from that in the preceding decade. 
Fluctuations w^ere much more frequent and 
for nearly eighteen years the general tendency 
was downward, though interrupted by brief 
revivals in prices in the 3'ears 1882, 1886, 1887, 
1890 and 1895. The rise in price which occurred 
in 1887 and other years proved to be greater than 
the increased demand would sustain. The 
general statement may be made that during 
this long period between 1880 and 1897, in fact 
until 1898, for there was only a slight rise in 
that year, and the average price of several 
forms w^ere less than in 1897, the demand did 
not keep pace w4th the increasing supply, and 
improvements in production were constantly 
exerting their influence. The increase in price 
in the United States in 1887 was greater than 
in other countries. The reason for the difference 
may be found in the exceptional dem.ands in the 
year 1887, for in that year occurred the most 



COMMODITY PRICES 311 

extensive railway building and the greatest 
consumption of steel rails. There was an 
exceptional deficiency in the home supply. 
There was also a revival of general activity in 
this country, the effect of which was con- 
spicuous. It should be further noted that the 
crisis of this decade was much less severe than 
that of 1873, and the downward movement 
succeeding it, though long continued, mani- 
fested less decline in prices. 

After the high prices of 1890, there was a 
fall which continued until the month of July, 
1897. This fall was more uniform than those 
after 1880 and 1887. It was interrupted only 
by a temporary revival beginning after April, 
1895, and continuing until the latter part of 
the year. Beginning in July 1897 prices showed 
an upward tendency, but increases were slight 
until the beginning of 1899; then there was a 
very rapid rise until the latter part of the year, 
v/hich continued with the exception of a very 
slight setback in 1903 to the depression of 
1907-8. 

In the examination of these price movements 
several marked tendencies appear: 

(1). The interval between the date of the 
maximum prices and the succeeding crisis is 
longer in the later years. This interval con- 
tiniied for a few months prior to the crisis of 



312 BUSINESS BAROMETERS 

1825 and 1837, nearly a year prior to that of 
1873, and several years prior to the crisis of 
1884 and 1893. This longer interval may 
be explained by the greater ability to carry 
accumulated stocks in expectation of a rise, the 
larger influence of speculation, and the absorp- 
tion whenever prices decline, of larger quan- 
tities by the market now existing. 

These influences explain another tendency, 
viz: — 

(2.) In later years fluctuations are more 
frequent. In the period after the downward 
price movem.ent has commenced the market 
price breaks and then is restored again. It is 
evident that abundant capital for construction 
is waiting for investmxcnt and, even in case of a 
slight decline, purchases are large and tend to 
bring prices^to the former level. 

(3). Since 1873 the maximumx price reached 
in each cycle tends to be less than that in the 
preceding cycle. This is due to invention, 
to the lower cost of manufacturing on a large 
scale, and improvements of transportation. 
This tendency to lower prices is a part of the 
progress of the time and an essential feature 
in each depression. 

(4). The upward movement of prices con- 
tinues for a miych shorter time than the down- 
ward movement. The upward movement pre- 
ceding the maximum of October and November 



COMMODITY PRICES 313 

1872, continued for one year and nine months. 
The succeeding downward movement lasted 
until November 1878, or six years and one 
month. Then an upward movement continued 
until February, 1880, or one year and three 
months; the succeeding downward movement 
lasted approximately five and one half years, 
to the summicr of 1885, to be followed by a 
rising movement interrupted in the United 
States in 1888 and 1889, of four and one-half 
years, or until January, 1890. It is to be no- 
ticed, however, that the rise in most grades of 
iron and steel for a year after the sum^mer of 
1885 was very slight. After January, 1890, the 
downward movement continued for seven and 
one half years to July 1897, when prices for a 
year were alm^ost stationary, to be followed by 
rising prices, which continued until the end of 
1899 or less than a year and a half. 

(5). The rapid rise which precedes a maxi- 
mum price rarely continues for more than a year. 
If we take anthracite and Bessemer pig iron as 
the best standard, it will be noticed that prior 
to the maximum price of anthracite, September 
1872, prices rose from $37in January of that year; 
prior to the maximum of $41 in February 1880, 
prices had risen rapidly from $20.75 in August 
1897, or for six months; prior to the maximum of 



314 BUSINESS BAROMETERS 

$19.90 in January 1890, there was a rise from 
$17 in May 1889, or for eight months; prior to 
the maximium of $25 for Bessemer pig iron in 
December 1899, there was a rapid rise from 
$11 in January of the same year, or for eleven 
months. In many respects the rise in 1899 
was the most remarkable of all, because it had 
been considered by manufacturers in the pre- 
ceding years that the equipment for production 
was sufficient to properly meet any increase of 
demand, and yet the rapid rise in that 3 ear was 
unprecedented. The great increase in the 
price of iron and steel in that year, with the 
steady increase in production after 1894, proves 
the more general use of these products for a 
greater variety of purposes and over an en- 
larged area." 

For a general study of prices the merchant 
should select ten representative commodities 
such as wheat, corn, cotton, sugar, pig iron, 
pork, copper, wool, coffee and rubber and 
tabulate or plot the wholesale prices of these 
at regular intervals. 

It will be noticed in studying general com- 
m.odity prices that they do not fall materially 
after a year of panic, curtailment and depression; 
for this fact there are two explanations: 



COOIODITY PRICES 315 

One of these attributes the persistence of 
prices on high levels to the continuous supply 
of gold, which is now being supplied at a rate 
of more than a million dollars a day. The 
other explanation finds the causes for the effect 
in question due to several different influences 
which have characterized the industrial and 
commercial world for fully a decade. It is 
well worth while setting over against the single 
item of gold supply these other factors as part 
of the dynamics w^hich have helped to lift 
the great plane of values to the level where it 
has, with proper exceptions and limxitations, 
persistently stood for the past several years. 

There are three at least, if not four substan- 
tial reasons why prices have risen so rapidly 
since the opening of this century and have 
been maintained so stubbornly. 

First. The first factor is the enormous 
increase in the world's purchasing power aris- 
ing from the annual increment of values in 
the output of mines, agriculture, forests and 
other extractive industries. It is figured con- 
servatively that in the past ten years there 
has been taken out of the earth and the waters 
of the United States alone a sum of natural 
values amounting to $90,000,000,000, as fol- 
lows: 



316 BUSINESS BAROMETERS 

Mineral output (ten years) . . . $14,000,000,000 
Agricultural products (ten 

years) .^ 60,000,000,000 

Lumber products (ten years) 12,000,000,000 
Grazing, fishing, etc., (ten 

years) 4,000,000,000 

Total for decade in United 
States 90,000,000,000 

Second. Another factor in maintaining high 
prices is the expansion in the geographical area 
of productive enterprise over new territories 
which during the last decade have for the first 
time been fairly incorporated into the world's 
market. Within this period nearly the whole 
of Siberia has been added to the world's trad- 
ing area, through the enormous outlay required 
to build the Trans-Siberia Railroad. Every 
foot of this trans-continental thoroughfare was 
accompanied by the creation of new demand 
for commodities, new capital for development 
and by the manifestation of new power to 
purchase. What was done in Siberia in an 
extensive way has also been done in Japan, 
China, India, Egypt, Austraha, Africa, South 
America, Mexico and Canada, since prices 
began their upward movement in 1897. The 
work of money, as well as the work of man 
and of his implements of production, has all 



COMMODITY PRICES 317 

been earning an increasing income, which al- 
most im.mediately manifests^ itself in an ex- 
panding demand upon the industrial nations 
for their output. 

Third. Thirdly, the maintenance of high 
prices is probably due to the rise of the standard 
of living which a decade of increasing wealth 
has first produced, and then estabHshed with 
a resisting power that even in times of de- 
pression resists with a new force any recession 
in its newly gained advantages. 

Fourth. Finally there is a fourth factor 
behind existing price levels in the forms of the 
wastes of wars and in the millions of mis- 
directed capital which have helped to enhance 
the costs of profitable production. The power 
behind high prices is not the uplift of gold but 
rather the aspiration of man, whether seen in 
the individual's impulse to gain income or in 
large-scale production to control markets. Gold 
as a dynamic element has its part, but as a 
m^easure of value it is a gauge rather than a 
cause." 

Therefore the price of commodities is one of the 
best of business barometers and all merchants 
and bankers systematically tabulate each month 
the " Index Number " compiled by Bradstreet 
or others, supplemented with figures on the price 
of iron per ton. 



318 BUSINESS BAROMETERS 

The following conclusions are suggested rel- 
ative to " Commodity Prices." 

1. During a Period of Business Depression. 

(a) An increase in commodity prices dur- 
ing a period of depression, after a period of low 
commodity prices j signifies that the depression 
has come to an end; but such an increase 
must be preceded by a distinct decrease to be 
a favorable sign. 

(b) A decrease in commodity prices is nor- 
mal and until said decrease no perm.anent 
change for the better can be expected. 

(c) No change is often unsatisfactory. 

2. During a Period of Improvement Following 
O' Period of Depression. 

(a) An increase following a decrease sig- 
nifies that the period of improvement is pro- 
gressing satisfactorily. 

(b) A decrease also signifies that the period 
of improvement is progressing satisfactorily. 

(c) No change signifies that caution should 
be used. 

3. During a Period of Prosperity. 

(a) A great increase in the commodity price 
is one of the signs of the end of this period. 

(b) A decrease is very unusual and should be 
carefully investigated. 

(c) No change signifies normal con ditions. 



CROP CONDITIONS 319 

4. During a Period of Decline FolloW" 
ing a Period of Prosperity. 

(a) An increase is not unusual as com- 
modity prices usually continue to increase 
about one year after the decline in stocks 
takes place. 

(b) A decrease signifies that the period of 
decline is progressing satisfactorily. 

(c) No change is normal at the beginning 
of this period. 

Crop Conditions 
This subject now does not hold the same 
relative importance in the study of Funda- 
mental Statistics, that it held when statistics 
on other topics were less carefully compiled. 
But since the full annual harvest of the grains 
and cotton is the one factor at the bottom of 
American business prosperity, the condition 
of the standing crops will always be interest- 
ing and valuable as a barometer. Of all 
subjects studied by the merchant and investor 
it is the only one which the Government 
attempts to forecast. Figures on banking 
conditions, labor conditions, imports and 
exports are accumulated by the Government 
and are valuable as a matter of history; but 
in none of these subjects is there any official 
attempt to forecast conditions or use the 
figures accumulated for forecasting purposes. 



320 BUSINESS BAROMETERS 

Not only does the Government publish a 
report on the amount and condition of the 
crops, in various stages from planting to the 
beginning of harvest, but it makes a prediction 
for the benefit of business interests of what the 
total crop is likely to be. It has been well 
proved that this forecast made by the Govern- 
ment is better than any forecast which' at 
the present time can be made by any asso- 
ciation of m-erchants or bankers independently. 
For this reason the m.ethod of compiling 
and distributing these forecasts should^ be 
clearly understood and the following is a 
detailed explanation by Chas. C. Clarke, 
of the U. S. Bureau of Statistics. -'"- 

'There are three divisions in the Bureau 
of Statistics of the Department of Agriculture : 
the Division of Domiestic Crop Reports, the 
Division of Foreign Markets, and the Editorial 
Division and Library, each of which has 
a chief of division reporting directly to the 
Statistician. 

Statistical information concerning crop pro- 
duction and live stock that is collected by the 
slow and exact methods of a census is generally 
not given to the public until after the crops 
enum^erated are harvested and marketed and 
the imm.ediate interest in it has passed away. 



CROP CONDITIONS 321 

Prices of agricultural products are primarily 
governed by the law of supply and demand; 
therefore early information concerning the 
supply is of value to all. Those who produce 
and those who consume are vitally interested 
as well as the dealer w^ho stands between them. 
The relations and mutual interests of agri- 
culture, manufacture, and commerce de- 
mand that there should be pubHshed at brief 
intervals during the crop season reliable 
information on the condition, acreage, pro- 
duction, and value of the principal crops, by 
States and agricultural areas. 

As commerce consists largely in an exchange 
of the products of agriculture and manufacture 
am.ong their respective producers, commerce 
thrives as the farmer and the factory operative 
prosper. Some individuals, however, do not 
always regard the commion welfare, and 
injurious commercial speculations occur when 
ignorance prevails concerning the condition 
of our crops and the true relations of supply 
and demand. At such times the farmer 
often does not obtain just prices, while the 
consumer derives no benefit and business is 
injuriously affected. The consequences of 
false reports concerning the condition, and 
prospective yield of the cotton crop alone may 



31Z BUSINESS BAR03IETEKS 

be very injurious. If there were no ade- 
quate Government crop-reporting service, and 
by misleading reports speculators should 
depress the price a single cent per pound, the 
growers would lose $60,000,000 or more; if the 
prices were improperly increased, the manufac- 
turers and allied interests would be affected 
to a proportionate degree. All interests there- 
fore demand that the true condition of crops 
should be made known promptly, and harm- 
ful speculation discouraged. 

It was to remedy these evils and to subserve 
and protect the interests above noted that 
Congress provided for issuing monthly crop 
reports. From an allotment of a few thous- 
and dollars each year at first, the crop report- 
ing service has been evolved, perfected, and 
enlarged into the Bureau of Statistics of this 
Department, and the total cost of such ser- 
vice from its institution down to date has 
been about three and a half miUion dollars. 
Thus for forty-five years the total cost of this 
service has been less than one-third of the 
amount required to take the last census of the 
United States; yet the consequent protection 
to the farmers alone has been of incalculable 
value. 



CBOP COXDITIONS 323 

The Bureau of Statistics issues each month 
detailed reports relating to agricultural con- 
ditions throughout the United States, the 
data upon which these facts are based being 
obtained through a special field service, a 
corps of State statistical agents, and through 
a large body of voluntary correspondents 
composed of the following classes: County 
correspondents, township correspondents, in- 
dividual farmers, and special cotton cor- 
respondents. 

The special field service is composed of seven- 
teen traveling agents, each assigned to report 
for a given group of States. They are es- 
pecially qualified by statistical training and 
practical knowledge of crops. They system- 
atically travel over the districts assigned to 
them, carefully note the development of each 
crop, keep in touch with best informed opinion, 
and render written and telegraphic reports 
monthly and at such other tim.es as required. 

There are forty-five State statistical agents, 
each located in a different State. Each of these 
reports for his State as a whole, and maintains 
a corps of correspondents entirely independent 
of those reporting directly to the Departm^ent 
at Washington. These State statistical cor- 
respondents report each month directly to the 



324 BUSINESS BAROMETERS 

State agent on schedules furnished him. These 
reports are then tabulated and weighted ac- 
cording to the relative product or area of the 
given crop in each county represented, and 
are summarized by the State agent, who co- 
ordinates and analyzes them in the light of 
his knowledge of conditions derived from 
personal observation and other sources, and 
prepares his monthly and other written and 
telegraphic reports to the department. 

There are approximately 2,800 counties of 
agricultural importance in the United States. 
In each of these counties the Department has 
a principal county correspondent who main- 
tains an organization of several assistants. 
These county correspondents are selected with 
special reference to their qualifications and 
constitute an efficient branch of the crop- 
reporting service. They make the county 
the geographical unit of their reports, and after 
obtaining data each month from their assis- 
tants and supplemienting these with information 
obtained from their own observation and knowl- 
edge, report directly to the Department 
of Washington. 

In the townships and voting precincts of the 
United States in w^hich farming operations are 
extensively carried on the Departm.ent has 



CROP COXDITIOXS 325 

township correspondents who make the town- 
ship or precinct the geographical basis of reports, 
which they also send directly to the Bureau of 
Statistics each month. 

Finally, at the end of the growing season 
a large number of individual farmers and planters 
report on the results of their own individual 
farming operations during the year; and valu- 
able data are also secured from 30,000 mills 
and elevators. 

With regard to cotton, all the informiation 
secured from the foregoing sources is supple- 
mented by that furnished by special cotton 
correspondents, emibracing a large number of 
persons intimately concerned in the cotton 
industry, and, in addition, inquiries in relation 
to acreage and yield per acre of cotton are 
addressed to the list of cotton ginners through 
the courtesy of the Bureau of the Census. 

Eleven monthly reports on the principal 
crops are received yearly from each of the 
special field agents, county correspondents, 
State statistical agents, and township corre- 
spondents, and one report relating to the acre- 
age and production of general crops is received 
during the year from individual farmers. 

Six special cotton reports are received dur- 
ing the growing season from the special field 



326 BUSINESS BAROMETERS 

agents, from the county correspondents, from 
the Sxsite statistical agents, and from township 
correspondents, and the first and last of these 
report relating to the acreage and pro-individ- 
ual farmers, special correspondents, and cotton 
ginners. 

The general reports for January and Feb- 
ruary are combined on one schedule and relate 
to the number and value of farm animals. 

The general report for March relates to 
the stock of grain in farmers' hands, the dis- 
tribution and consumption of corn, wheat, 
and oats, and the average weight per bushel 
of wheat and oats. 

Reports on the condition of the crops of 
the year begin with the April report, when the 
condition of winter wheat and rye is dealt 
with, prevailing diseases of farm animals, 
and losses from disease and exposure. 

The report for May com.es at a time when 
few of the crops are sufficiently advanced for 
their condition to be reported upon; conse- 
quently the inquiries relative to condition 
apply only to winter wheat, rye, meadow 
m.owing lands, and spring pasture. This sched- 
ule also deals with the portion, if any, of the 
original acreage sown to winter wheat for any 
reason has been or will be abandoned, and 



CROP CONDITIONS 327 

contains inquiries with regard to farm labor 
and tenants. 

The schedule for June deals with the acer- 
age of six crops, the most important of which 
is spring wheat. It also covers the condition 
of wheat, oats, barley, rye, clover, spring 
pastures, apples, peaches, and rice. 

The July schedule deals with the acreage 
of corn, potatoes, tobacco, and sugar cane; 
the stocks of wheat in farmers' hands; the 
average condition of all the principal crops, 
fruits, and spring pastures, and the average 
weight of wool per fleece. 

The August schedule deals with the average 
yield of winter w^heat per acre, acreage of 
buckwheat and hay, the condition of the 
principal crops, the quality of clover hay, and 
the stocks of oats in farmicrs' hands 

The September schedule deals with the 
condition, when harvested of wheat, oats, bar- 
ley and rye; the acreage of clover seed; the 
production of peaches, and the number and 
condition of stock hogs on hand for fattening. 

The October schedule deals with the average 
yield per acre and the quahty of spring w-heat, 
barley, oats, rye and hops, and the condition 
of corn, potatoes, sugar cane, tobacco, rice and 
apples. 



328 BUSINESS BAROIVIETERS 

The November schedule deals with the aver- 
age yield per acre of corn, buckwheat, potatoes, 
hay, tobacco and rice. 

The December schedule deals with the pro- 
duction and farm prices of all the principal 
crops, and the acreage of winter wheat and 
rye sown for the crop of the following year, 
and also with the condition of winter wheat 
and rye. 

In addition to the foregoing the reports 
during the past two years have been extended 
to include condition figures of many small 
fruits, vegetables and minor products. In- 
formation in regard to such products has been 
urgently requested, and as a basis for comx- 
parison has now been satisfactorily established 
the reports are received with interest and 
favorable comment. 

Previous to the preparation and issuance 
of the Bureau's reports each month, the cor- 
respondents of the several classes send their 
reports separately and independently to the 
Department at Washington. 

In order to prevent any possible access to 
reports which relate to speculative crops, and 
to render it absolutely impossible for premature 
information to be derived from them, all of 
the reports from the State statistical agents, as 



CROP CONDITIONS 329 

well as those of the special field agents, are 
sent to the Secretary of Agriculture in specially 
prepared envelopes addressed in red ink with 
the letter " A " plainly marked on the ends. 
By an arrangement with the postal authorities 
these envelopes are delivered to the Secretary 
of Agriculture in sealed mail pouches. These 
pouches are opened only by the Secretary or 
Assistant Secretary, and the reports, with 
seals unbroken, are immediately placed in 
the safe in the Secretary's office, where they 
remain sealed until the morning of the day 
on which the reports are issued, when they are 
delivered to the Statistician by the Secretary 
or the Assistant Secretary. The combination 
for opening the safe in which such documents 
are kept is known only to the Secretary and 
the Assistant Secretary of Agriculture. Re- 
ports from special field agents and State statis- 
tical agents residing at points more than 500 
miles from Washington are sent by telegraph, 
in cipher. Those in regard to speculative 
crops are addressed to the Secretary of Agri- 
culture. 

Reports from the State statistical agents and 
special field service in relation to non-speculative 
crops are sent in similar envelopes marked ** B," 
which go to the Bureau of Statistics, and are 



330 BUSINESS BAROMETERS 

kept securely in a safe until the data contained 
in them are required by the Statistician in 
computing estimates regarding the crops to 
which they relate. The reports from the 
county correspondents, township correspondents 
and other voluntary agents are sent to the 
Chief of the Bureau of Statistics by mail in 
sealed envelopes. 

The plan of intrusting the final preparation 
of reports to a crop-reporting board has been 
continued during the past year, and after two 
full years of trial it has been demonstrated 
that such is an excellent and satisfactory 
m^ethod. It relieves one man of the strain 
and responsibility, and secures the benefits 
of consultation and a consensus of judgment 
of men who have been on the ground. 

The Crop Reporting Board is com.posed 
of the Chief of Bureau as chairman, and four 
other members, whose services are brought 
into requisition each crop-reporting day from 
among the statisticians and ofificials of the 
Bureau, and the special field and State statistical 
agents who are called to Washington for the 
purpose. 

The personnel of the board is changed 
each month. The meetings are held in the 
ofifice of the Statistician, which is kept locked 



CROP CONDITIONS 331 

during sessions, no one being allowed to enter 
or leave* the room or the Bureau, and all tele- 
phones being disconnected. 

When the board has assembled reports and 
telegrams regarding speculative crops from 
State and field agents, which have been placed 
unopened in a safe in the office of the Secretary 
of Agriculture, are delivered by the Secretary, 
opened and tabulated ; and the reports, by States, 
from the several classes of correspondents 
and agents relating to all crops dealt with 
are brought together in convenient parallel 
columns on final tabulation slips; the board 
is thus provided with several separate estimates 
covering each State and each separate crop, 
made independently by the respective classes 
of correspondents and agents of the Bureau, 
each reporting for a territory or geographical 
unit with which he is thoroughly familiar. 

Abstracts of the weather condition reports 
in relation to the different crops, by States, 
are also prepared from the weekly bulletins 
of the Weather Bureau. With all these data 
before the board, each individual member 
computes independently, on a separate sheet 
or final computation slip, his own estimate 
of the acreage, condition, or yield of each crop. 



332 BUSINESS BAROMETERS 

or of the number, condition, etc., of farm ani- 
mals for each State separately. These results 
are then compared and discussed by the board 
under the supervision of the chairman, and the 
final figures for each State are decided upon. 
It has been interesting to note how often the 
reports of the different classes of correspondents 
and agents are very nearly identical and how 
closely the figures arrived at independently by 
the individual members of the board agree. The 
estimates by States as finally determined by 
the board are weighted by the acreage figures 
for the respective States, the result for the 
United States being a true weighted average 
for each subject. 

There have been eighteen meetings of the 
Crop Reporting Board during the past year, 
in most of which the personnel has been changed 
each mionth. Six special field agents, specialists 
in their respective lines of statistical and crop 
knowledge, and eight State statistical agents 
have served in the difierent board meetings. 
Many of these m.en are widely known through- 
out the United States, and the practice of 
having them, take part in the preparation of 
the monthly crop reports and estimates has 
proved highly satisfactory, and has been a 
great factor in establishing the confidence 



CROP CONDITIONS 333 

of the public generally throughout the country 
in the fairness and correctness of the Bureau's 
estimates. 

Reports in relation to cotton, after being 
prepared by the Crop Reporting Board, and 
personally approved by the Secretary of Agri- 
culture, are issued on the second or third day 
of each month during the growing season, and 
the reports relating to the principal farm crops 
and live stock are prepare'd and made public 
on the ninth or tenth day of each month. In 
order that the information contained in these 
reports may be made available simultaneously 
throughout the entire United States, they are 
handed, at an announced hour on report days, 
to all applicants and to the Western Union 
Telegraph Company and the Postal Telegraph 
Cable Company, who have branch offices in 
the Department of Agriculture, for trans- 
mission to the exchanges and to the press. 
These com.panies have reserved their lines at 
the designated time, and forward immediately 
the figures of most interest. A mimeograph or 
m.ultigraph statement, also containing such 
estimates of condition or actual production, 
together with the corresponding estimates of 
former years for comparative purposes, is pre- 
pared and sent immediately to exchanges, 



334 BUSINESS BAROMETERS 

newspaper publications and individuals. The 
same afternoon printed cards containing the 
essential facts concerning the most important 
crops of the report are mailed to the 77,000 
post-offices throughout the United States for 
public display, thus placing most valuable in- 
formation within the farmer's immediate reach. 

Promptly after the issuing of the report, it, 
together with other statistical information of 
value to the farmer and the country at large, 
is published in the Crop Reporter, an eight- 
page publication of the Bureau of Statistics, 
under the authority of the Secretary of Agri- 
culture. An edition of over 120,000 copies 
is distributed to the correspondents and other 
interested parties throughout the United States 
each month. Thus the inform.ation is spread 
broadcast." 

As the government crop statistics are neces- 
sary and valuable as business barometers, so 
figures showing the productioji of all commodities 
are of intense interest. 

The production of iron, for example reported 
by the two leading weeklies on the subject, 
is a very important factor in determining pres- 
ent conditions and forecasting future conditions. 
This was especially true before the United 
States Steel Corporation was formed and to a 



CROP COKDITIOKS 335 

large extent is also true today. Figures re- 
garding wheat, corn, cotton, iron, pork, copper, 
wool, coffee, rubber, sugar and other com- 
modities are also of interest. A decrease in the 
production of commodities is always accom- 
panied by a decrease in activity, which means 
that men and capital are idle. This reduced 
activity, if reduced beyond a certain point will 
result in a crisis followed by a period of de- 
pression. 

This general principle, as especially applic- 
able to the investor, is well presented by Mr. 
Henry Hall somewhat as follows: 

A large part of the income of all railroad 
lines is derived from the shipment of grain, 
produce and cotton. From 6,000,000,000 to 
15,000,000,000 tons of these articles are shipped 
by rail to seaboard cities every year, for export- 
ation to other lands. A far larger tonnage is 
moved by rail from farm and plantation to 
cities and other settlements of the country 
for home consumption. The contribution to 
railroad traffic from this source always exceeds 
more than 30,000,000,000 tons of grain, 10,000,- 
000,000 tons of flour, about 3,000,000,000 tons 
of cotton, and a vast additional quantity of 
potatoes, tobacco, fruit and other products 



336 BUSINESS BAROMETERS 

of the harvest. Alore than once, in our his- 
tory, in dull times, has a loss in other earnings 
been made good by the transportation of agri- 
cultural produce; and in good times, bumper 
crops are of enormous and direct value to every 
railroad in the land. 

The productions of the soil affect powerfully 
the prosperity of the United States in another 
way. Their money value in a good year is 
almost bewildering. The staple crops which 
are reported officially in its monthly statement 
of acreage and conditions approximate a money 
value of 83,500,000,000; and a fluctuation of 
$500,000,000 in this imimense total, which is 
not uncommon, is felt at once in the business 
world. A boom in stocks has, more than once, 
originated in good crops. Depression has at 
times begun with a partial crop failure. 

Bountiful harvests have another and interest- 
ing effect, in that the exportable surplus en- 
ables the United States to pay off its borrowing 
of money abroad and to create a credit, which, 
if large enough, insures early importations of 
gold. There is no topic more deserving of 
interested attention than the state of the 
crops. Another writer states: 

" The country requires an increase in yield 
of at least 5% in all its principal crops, cotton 



CROP CONDITIONS 337 

perhaps excepted ; and in some cases an increase 
of at least 10% would be advisable, either 
through larger acreage or better cultivation. 
This would insure more reasonable prices for 
food products, thus reducing the cost of living 
about which so much just complaint is heard. 
It would also stimulate larger exports, the 
decline of which during the last year has been 
one of the most unfortunate accompaniments 
of our business depression. Larger exports 
of agricultural products would do more than 
anything else toward restoring the equilibrium 
of our foreign trade and would stimulate 
business at home." 

The profits, and therefore the stocks of 
railroad companies which operate through the 
grain and cotton sections, are affected in the 
most direct and powerful manner by the prom- 
ise of generous or stunted crops; and as they 
go, so goes the market. Investors need to 
keep in touch with the crop outlook. Wall 
Street always discounts the future and never 
waits for earnings to be affected actually 
before adjusting prices to what it sees coming. 

A slackening of trade in the street after a 
great boom precedes every financial crisis; and 
every investor must be as alert to detect the 
signs of a coming change of importance as are 



338 BUSINESS BAROMETERS 

the bankers, rich men and stock operators, 
upon whom the fortunes of the stock market 
depend. 

It is axiomatic that all railroads are affected 
directly and seriously by crop conditions, 
and industrial stocks peculiarly so. Therefore 
the subject of " Crops " is one which requires 
constant attention, and never more so than 
when a boom or a reaction has run on for a 
number of months, or years. Conservative 
merchants and investors therefore tabulate each 
month when published the Government Estimate 
of the wheat, corn and cotton crops, then in the 
ground, together with the annuual figures when 
the crops have been harvested. 

The following conclusions are suggested rel- 
ative to "Crops and other Commodities": 

(The condition of the crops has direct bear- 
ing upon the condition of the farmer, and an 
indirect interest for every investor and mer- 
chant.) 

1. During a Period of Business De- 
pression. 

(a) Improved crop conditions are often the 
beginning of a period of improvement. 

(b) Poorer crop conditions delay an im- 
provement in general business. 



CROP COXDITIONS 339 

(c) No change is favorable or unfavorable 
according to whether this means good crops 
or otherwise. 

2. During ol Period of Improvement Following 
^ Period of Depression 

(a) Improved crop conditions always give 
an impetus to the general improvement in 
conditions. 

(b) Poorer crop conditions always retard 
the improvement. 

(c) No change is favorable or unfavorable 
according to what it represents. 

3. During cl Period of Prosperity. 

(a) Improved crop conditions tend to 
lengthen the period of prosperity. 

(b) Poor crop conditions tend to shorten 
said period. 

(c) No change is favorable or unfavorable 
according to what it represents. 

4. During'' a Period of Decline Following 
<i Period of Prosperity. 

(a) Improved crop conditions tend to 
forestall a panic or delay ** the day of reckon- 
ing." 

(b) Poor crop conditions tend to hasten 
said time and perhaps cause a panic. 

(c) No change is or is not of importance 
according to what it represents. 



340 BUSINESS BAROMETERS 

Railroad Earnings 

Railroad earnings are of interest for two 
reasons: first, for forecasting the conditions 
of the railroads, upon which the prices of se- 
curities are directly dependent; secondly, for 
determining and forecasting the condition of 
general business. 

Although stocks of roads barely earning 
their operating expenses and interest charges, 
are of some nominal value simply on account 
of their voting power (and this value is gen- 
erally considered in the vicinity of about $10 
per share, par value $100) yet railroad stocks 
as a rule are worth very Httle unless the road 
is earning money. But whether or not a 
stock pays a dividend, it is self-evident that 
the prices must vary as the earning power. 
Increased earnings forecast higher prices for 
the securities and reduced earnings forecast 
lower prices. Manipulation mi ay temporarily 
force stocks far above or far below their true 
investment value, but neither high prices nor 
low prices can artificially be maintained for 
long. In the end the prices must adjust them- 
selves according to earnings. As most invest- 
ments are either directly or indirectly in the 
form of railroad securities, railroad earnings are 
of great importance to the investor. 



RAILROAD EARNINGS 341 

For the purpose of forecasting general business 
conditions, these earnings are also of great 
interest. As statistics they are so important 
for this purpose that many merchants consider 
only bank clearings in addition to railroad 
earnings in making up a barometer of actual 
business conditions. There are several reasons 
for this choice, of which the two following 
are especially well founded: 

(1). Because nearly all bills are paid in 
checks, bank clearings serve as a barometer 
of the total amount of sales; but railroad 
earnings likewise serve as a similar barometer, 
because practically all goods purchased or 
sold are shipped on the railroads. If the freight 
earnings of the United States show an increase, 
it is very evident that manufacturing and 
commerce is increasing; and the same is true 
conversely, if the freight earnings are decreasing. 
Therefore the earnings of the railroads may be 
considered in the same manner as the clearings 
of the banks. 

(2). Another important reason is that not 
only are railroad conditions a barometer of 
trade conditions, but to a large extent they are 
the basis of general trade conditions. This is 
due to the fact that the railroads employ so 



342 BUSINESS BAROMETERS 

large a proportion of the working class pop- 
ulation of the United States, and that so many 
industries are absolutely dependent on the 
railroads for their business. The railroads 
are the best purchasers of contractors' supplies 
and contract labor; of iron and steel for rails 
and bridges; of lumber, for ties and stations; 
of coal for motive power and heating; of oil for 
lighting and lubricating; of printer's supplies 
for time-tables, tickets, etc. etc. In fact this 
list might be indefinitely extended to show that 
the prosperity of the country is inseparably 
connected with the prosperity of the railroads. 

Therefore, for the above two reasons, the 
wise investor and merchant very carefully 
watches railroad earnings, both for deter- 
mining the present conditions and for forecast- 
ing future conditions. In this connection the 
history of railroad earnings during the past 
three depressions may be of interest. During 
the reaction of 1873 the high level of gross 
earnings was reached in the same calendar 
year as the panic itself, but the recession from 
this high point was fairly evenly spread over 
the next four years. The recovery, on the 
contrary, was strikingly rapid. In 1879, only 
two years after gross earnings had been at 
their worst, they made a new high record. 



RAILROAB EARNINGS 343 

By reducing " maintenance charges " the 
net earnings increased for a year after the 
reaction began, the gain between 1873 and 
1874 having been almost four per cent. There- 
after net earnings declined along with the 
gross, to their low level in 1877. In the follow- 
ing two years they recovered even more rapidly 
than gross earnings, making up most of their 
lost ground in one year. The reaction between 
the top and bottom levels in net earning was 
practically 10% but between the two years in 
which the gross receipts sank from top to 
bottom levels the difference in net was con- 
siderably less. Moreover this decrease was 
accompanied by an increase in mileage of 
nearly 12%. 

While the panic of 1873 severely checked 
railroad construction, it by no means checked 
such development altogether. This crisis fol- 
lowed one of the most pronounced waves of 
railroad construction ever witnessed. In two 
years preceding the panic, operated mileage 
increased by 21,600 miles, or 48%, which of 
course is always a distinct danger signal. 

The next depression of 1884-5 shows a dif- 
ference from other depressions in relation of 
operating expenses to volume of business. 
Thus in 1894, the percentage decline in net 



344 BUSINESS BAROMETERS 

earnings was a trifle less than that of gross; 
but in the '80's the lessening volume of trafiEc 
was not accompanied by a proportionate re- 
duction in earnings. The comparison of top 
and bottom levels in this depression follows: 

Mileage Gross Net 

1883 ... 106,938 $807,112,780 $291,587,58a 
1885 ... 123,320 772,567,883 269,493,931 
Decrease *16,382 34,543,897 22,093,657 
Per cent. 15.3 4.2 7.5 

In so serious a crisis as that of the '90's the 
maximum reaction in railroad earnings w^as 
not more than 12%. However, aggregate 
figures covering so many railroads of such 
wide diversity of location and condition, tend 
to obscure the facts as they apply to individual 
undertakings. Constant addition of new mile- 
age tends to reduce the record of damage 
sustained by the old roads. The reduction 
of the figure to a mileage basis would still 
be an inaccurate test because the earning 
power of new and additional mileage is naturally 
low. Furthermore, construction of new roads 
frequently takes away business from those 
roads already in existence, and thus tends to 
lower the average earnings per mile, without 
any actual decrease in the am.ount of business. 



RAILROAD EARXIXGS 345 

A comparison between fat and lean years could 
best be made by using figures for identical 
mileage. 

Aggregate railroad earnings reached a new 
high level in 1893 and again acted as a distinct 
danger signal, for the crisis itself took place in 
the second half of that calendar year. The 
reaction in general business came the next 
year, when both gross and net immediately 
reached the low level of that movement. The 
recovery, though slow, was fairly continuous 
throughout five or six succeeding years. The 
extent of the reaction from the top level of 1893 
to the bottom level of 1894 is shown in the fol- 
lowing figures: 
Mileage Gross Net 

1893 . 175,441 $1,207,106,626 $358,648,918 

1894 . 178,054 1,066,943,358 317,757,399 
Decrease *2,613 140,163,268 40,891,519 
Percent 1.5 11.6 11.4 

1907 . 222,635 2,603,757,503 833,339,600 

1908 . 228,188 ^2,378,000,000 

* Estimate of The Boston News Bureau. 

The next high point was reached in 1907, when 
the aggregate mileage increased to 222,635, the 
aggregate gross to $2,602,757,503 and the 
aggregate net to $833,339,600. This gross 
and net fell off simultaneously with the decrease 



346 BUSINESS BAROMETERS 

in business,^ an aggregate total of about 9%, 
the low point having been reached in the latter 
part of the summer of 1908. Since that 
time there has been a gradual improvement. 

It therefore is advisable for merchants and 
investors to select about ten large roads, operat- 
ing in different parts of the country and sys 
tematically tabulate their gross earnings as pub- 
lished each month. As the final figures for all 
roads are published, they also are interesting to 
note; but for practical purposes it is much better 
to tabulate the earnings of only ten. 

The following conclusions are suggested rel- 
ative to " Railroad Earnings." (The tabu- 
lation of Railroad Earnings is of great value 
to the merchant; but the investor^ must re- 
member that the stock market decUnes before 
earnings decHne, and that prices begin to in- 
crease several months before earnings show 
any increase. Therefore this subject is not 
of as much practical value to the investor as to 
the merchant for forecasting purposes.) 
1. Duri?ig a Period of Depression. 

(a) An increase signifies that conditions 
are improving. 

(b) A decrease signifies " uncertainty." 

(c) No change usually signifies that con- 
ditions are about to improve. 



RATLROAD EARNINGS 347 

2. During a Period of Improvement Follow- 
ing\a Period of Depression. 

(a) An increase signifies that the improve- 
ment in conditions is progressing satisfactorily. 

(b) A decrease signifies that the improve- 
m.ent is temporarily checked. 

(c) No change signifies nothing definite. 

3. During a Perid of Prosperity. 

(a) A great increase calls for caution. 

(b) A decrease during a period of prosperity 
is very extraordinary and usually signifies 
that the corner has been turned and a reversal 
of conditions has already commenced. 

(c) No change signifies that a period of 
decline may be expected to begin. 

4. During a Period of Depression Follow- 
ing a Period of Prosperity. 

(a) An increase signifies a temporary check 
in the decHne. 

(b) A decrease signifies that conditions 
are rapidly becoming worse. 

(c) No change signifies nothing definite. 
Special Note: — In using the above rules — 

as also is true in regard to the rules given under 
other subjects — one must compare with the 
corresponding month of the preceding year 
and not with the preceding month. In other 
words, the merchant and investor when study- 



348 BUSINESS BAR03IETERS 

ing Fundamental Statistics or Business Barom- 
eters must not be misled by seasonable 
changes — which are wholly normal. 
Idle Car Figures 

Idle car figures have been available only for 
a short time and therefore investors and mer- 
chants have as yet given but little attention 
to this subject. Moreover they are of direct 
interest only in forecasting business conditions, 
as explained under the heading of " Railroad 
Earnings." In other words, idle car figures 
bear the same relation to railroad earnings, as 
the Government crop estimates bear to the 
total figures compiled after the crop has been 
gathered. 

These idle car figures are collected by the 
American Railway Association which receives 
every two weeks from each railroad the number 
of their surplus cars or the number of the cars 
they are short, as the case may be. Of course 
no one railroad will report at any given timie 
both a surplus and a shortage; but it is very 
natural for certain roads in certain localities 
to have a surplus; while other roads in an en- 
tirely different locality may report a shortage. 
All of these " surpluses " and " shortages " 
are com.bined and reported in a total by the 
Association once in two weeks. 



IDLE CAR FIGURES 349 

As in the case of exports and imports it is 
the balance, namely the " net surplus " or 
" net shortage " that the investor or merchant 
watches with interest. It takes about six 
weeks for a car to be taken from the siding, 
looked over, loaded, delivered, unloaded and 
the revenue received. Then as the railroads 
do not publish the earnings of a car for about 
a month or more after they are received, it 
may be three months after a car is taken from 
the siding, before the earnings of that car 
appear in the monthly statement. Conversely, 
it is also true that when a car is returned to 
the siding, the effect of taking it out of service 
will not show in the published earnings for 
perhaps three months thereafter. 

By tabulating idle car figures therefore their 
study enables the investor and merchant to fore- 
cast an increase in railroad earnings almost three 
months before it matures, and likewise to forecast 
a decrease in railroad earnings almost three 
months before it occurs. As railroad earnings 
are such an excellent barometer of trade condi- 
tions, idle car figures serve as a most valuable 
factor in forecasting mercantile conditions. 

Note: — The Amierican Railway Association 
divides its report into eleven divisions with a 
minimum of 155 roads located as follows: 



350 BUSINESS BAROMETERS 

No. of roads 

New England 8 

N. Y. N. J., Md, & E. Pa : 22 

Ohio, Ind., Mich., & W. Pa 20 

Va., W. Va., No. Car., & So. Car 10 

Ky., Tenn., Miss., Ala., Ga., & Fla 19 

Iowa, 111., Wis., Minn. No. Dak 27 

Mont., Wyo., Neb., & So. Dak 3 

Kans., Colo., Okla., & I. T 15 

Ore., Idaho, Cal., Nev., & Ariz 18 

Canadian Lines 3 

Total 155 

The following conclusions are suggested rel- 
ative to " Idle Car Figures." 

(Idle car figures are of great value to both 
merchant and investor as they forecast earnings. 
When the actual earnings are published it is 
often too late for the investor to profit thereby 
as their effect has already been discounted. 
This, however does not apply to idle car figures.) 

1. During a Period of Business Depression. 

(a) An increase of idle cars signifies that 
conditions are not yet improving. 

(b) A decrease signifies that a change for 
the better may be expected. 

(c) No change signifies that caution is still 
necessary. 

2. During a Period of Improvement Follow- 
ing a Period of Depression. 



REMGIOUS AND SOCIAL CONDITIONS 351 

(a) An increase in idle cars signifies that 
the improvement may be temporarily checked. 

(b) A decrease signifies that the improve- 
ment is progressing very satisfactorily. 

(c) No change signifies that caution is 
still necessary. 

3. During a Period of Prosperity. 

(a) An increase in idle cars signifies that 
a change for the worse may be expected at 
any time. 

(b) A decrease signifies that prosperity 
may be expected to continue a while longer. 

(c) No change signifies nothing unsatis- 
factory. 

4. During a Period of Decline Following a 
Period of Prosperity. 

(a) An increase signifies that conditions 
are daily becoming worse. 

(b) A decrease signifies that a temporary 
check may be expected in the decline. 

(c) If there is no change the figures need 
not be considered. 

Religious and Social Conditions and Mis- 
cellaneous Statistics. 
The condition of public opinion in the country 
as a whole, the stand taken by any large num- 
ber of people, or representative body of people, 
with regard to social or religious questions, 



352 BUSINESS BAROMETERS 

exerts a constant influence upon business 
conditions. Not only in politics and the larger 
field of government as shown in election or 
municipal reforms, but in all religious or social 
m.ovements, the feeling of the people should be 
watched closely. Most investors and mer- 
chants look upon crops, money and poHtics 
as the three most important topics to study 
in order to form a clear idea of the present 
state of business and a sound judgment of 
what is to be expected. They would also do 
well to look into the field of social and religious 
tendencies because they will find there material 
of great use in determining the trend of business. 
From time immemorial, periods of prosperity 
have been accompanied by a decline in rehgious 
interests and by a laxness in moral and social 
customs. Conditions, religiously, socially and 
morally, are always at their w^orst imm.ediately 
preceding a severe crisis or panic. The perils 
to a nation during a period of prosperity are 
much greater than the perils accompanying 
a period of depression. For this reason the 
social and commercial corruption which has 
followed the declaration of peace after great 
wars, has always been more disastrous to the 
conquering country than the actual war. 
This has been true during all history. 



RELIGIOUS AXD SOCIAI; CONDITIONS 353 

It was commercial and political corruption, 
rather than the Northern barbarians that 
destroyed ancient Rome and that ruined 
beautiful Venice. It was commercial and social 
corruption that transformed Spain from the 
foremost empire of the world to a third rate 
power, and likewise overturned the Bourbon 
empire in France. England itself would have 
com.e to a similar fate had it not been for the 
revival of righteousness which drove the cor- 
rupt men from power at the time of the East 
Indian troubles and at other periods of her 
history. The American Civil War was followed 
by great financial and social corruption and 
even General Grant, although himself incor- 
ruptible, could not save his country from the 
effect of greed and wrong doing. 

The famious election which followed was 
noted for the frauds which characterized both 
parties and these frauds were so gigantic that to 
this day it is uncertain whether Tilton or Hayes 
was actually elected President of the United 
States. As is the case during all such periods 
of personal, commercial and civic corruption, 
this period was followed by the great business 
depression beginning about 1873. 

Immediately following this depression a 
period of religious and civic revivals swept 



354 BUSINESS BAROMETERS 

over the nation. The additions to churches, 
the great temperance movement, and other 
similar movements for righteousness received 
an unprecedentedly great impetus during these 
years following the panic of 1873. This return 
to righteousness was again followed by a return 
of prosperity in the early '80's. 

The nation, however, forgot from whence 
these blessings came and rehgious interest 
again declined. This lack of interest in relig- 
ious matters culminated in the panic of 1884. 
Once more the reign of ungodliness was checked 
and the country recuperated from the de- 
pression of 1884, and again enjoyed several 
years of wonderful prosperity. It, however, 
took the nation only a few years to forget, and 
again civic corruption, social imm.orality and 
intemxperance began to increase. From 1900 
to 1903 religious and similar organizations 
showed very little growth. Consequently the 
era of prosperity began to wane, and cul- 
minated in the panic of 1893. 

The panic of 1893 again brought people to 
think upon serious matters and during the 
following few years, there was a great revival 
of righteousness throughout America. In fact 
the additions to churches and the growth of 
other religious m.ovements even exceeded that 



REMGIOUS AND SOCIAL CONDITIONS 355 

during the period following the panic of 1873. 
The people again cast aside luxuries, municipal 
and state governments were purified, evil 
doers were replaced by men of high integrity 
and great interest in all religious and moral 
undertakings developed in all parts of the 
country. 

People again lived in a decent and God-fear- 
ing manner in accordance with what their 
station permitted. Commercial houses for- 
sook the careless and questionable methods 
used during good old times and the old fash- 
ioned '' drummer " was replaced by the modern 
high grade salesman. It was on this foun- 
dation that the new period of improvement 
started and it was due to this revival of right- 
eousness, that the country was able to enjoy 
many years of great prosperity which came 
simultaneously with the close of the Spanish 
War. 

Unfortunately, however, the nation again 
forgot and was still unable to stand the temp- 
tations of a period of prosperity. Therefore 
again religious interest decHned, political cor- 
ruption re-opened and social immorality in- 
creased. Referring to these conditions in Feb- 
ruary 1909. Lyman A. Abbott states as fol- 
lows: 



356 BUSINESS BAROMETERS 

" Popular rumor attributed to Mr. Mc- 
Kinley's managers, although not to him, 
wholesale corruption in securing his first nom- 
ination and his first election. This corruption 
has not been confined to any one locality or to 
any one party. It has been equally appalling in 
its dimensions in New York, Boston, Philadel- 
phia, Cincinnati, Chicago, St. Louis, Minne- 
apolis, Denver, and San Francisco. It has included 
not only Boards of Aldermen but Legislatures, 
and it has crept into both the administrative 
and legislative departments of the Federal 
Government. Two United States Senators and 
three United States Representatives have sub- 
jected themselves to criminal prosecution for 
participation in frauds. Nor has this corrup- 
tion been confined to political circles. Insurance 
companies, banks, trust companies, mianu- 
facturers, trade unions have all been impHcated. 
More than one financial magnate is now serving 
a sentence for fraud. Others are under sen- 
tence and are awaiting the decision on appeal. 
Even judges haye not been wholly free from 
suspicion of obHgation for their election to the 
plutocracy." 

This is a description of the conditions from 
1898 to 1906 when the exposures commenced. 
Like all preceding periods of unrighteousness, 



REIilGIOUS AND SOCIAIi CONDITIONS 357 

this was followed by the panic of 1907, and the 
succeeding years of depression. 

Of course some writers, although admitting 
that a business depression revives interest in 
religious matters and that during great pros- 
perity, men do not have the time or inclination 
to give to such matters, they claim that the 
religious state of the nation does not offset 
the business conditions as .here represented 
Whether or not this is true we do not know, but 
certainly a study of the history of the United 
States and every other nation, seems to point 
to a definite relation between the tw^o interests. 
Moreover all economists agree that the religious 
condition of the country is distinctly worthy of 
study, — although they may disagree as to its 
relative importance compared with other sub- 
jects. 

Among those miscellaneous statistics which 
are tabulated by some bankers and merchants, 
may be mentioned the following: — 

Statistics on Losses and Wastes. 

Statistics on Changed Conditions. 

Absorption of Capital. 

Results of Invention. 

Economics due to Improved Methods. 

Statistics on Frauds and Lack of Credit. 

The Abuse of Credit. 



358 BUSINESS BAROMETERS 

The Contraction of Circulating Mediums 

Overproduction. 

Psychological Tendencies. 

MiUtary Armament. 

Income Taxes. 

Excise and Internal Revenues. 

Associated Charity Reports. 

All of the above have some distant bearing 
either for diagnosing present conditions or for 
forecasting future conditions; but none are 
sufficient in themselves, and when studying 
any one, due weight must be given to all of the 
others. The figures on any one of these sub- 
jects are of value only in their realtion to the 
other figures which we have previously con- 
sidered. As however none of these subjects 
are of sufficent importance to the merchant or in- 
vestor for him to collect and tabulate figures, no 
further thought need be given to them. 

The following conclusions are suggested rel- 
ative to " Religious Conditions." 
1. During a Period of Business Depression. 

(a) An increase in righteousness signifies 
that conditions are improving. 

(b) A decrease in righteousness signifies 
that conditions may become worse. 

(c) No change signifies that there will be no 
immediate improvement. 



RELIGIOUS AND SOCIAL CONDITIONS 359 

2. During a Period of Improvement Follow- 
ing a Period of Depression. 

(a) An increase in righteousness signifies 
that the improvement may be expected to 
continue. 

(b) A decrease signifies that the improve- 
ment will halt. 

(c) No change signifies that caution should 
be used. 

3. During a Period of Prosperity. 

(a) An increase in righteousness signifies 
that prosperity may be expected to continue. 

(b) A decrease signifies that a change for 
the worse may be expected. 

(c) No change is a normal state. 

4. During a Period of Decline Following a 
Period of Prosperity. 

(a) An increase tends to shorten the period 
of decline. 

(b) A decrease tends to make the coming 
period of depression all the more severe. 

(c) No change signifies the same. 



360 



BUSINESS BAROMETERS 



Statistics showing i 


ncrease in the members 


hip of Gon- 


gregational 


Churches in the United States 1 


3y profession 


(This denomination 


is choser 


I owing to their complete 


reports but the same 


rule applies to all denominations.) 


Year No.of 


Add.Mem- 




Additions by P^o- 


to Chur- 


bers by- 


Total New fession per locooo 


July ches 


Profession 


Members 


Population 


i860 2,585 


7.468 


14,821 


Decline 


. 2 Persons 


1861 2,555 


5.522 


12,151 


Depression . . 


.1 


i 


1862 2,580 


6,196 


12,629 


" 


I 


( 


1863 2,652 


7.765 


14.378 


Prosperity . . 


.2 


' 


1864 2,667 


9.032 


15,809 


Decline 


•3 


' 


1865 2,723 


11,030 


18,442 


Depression . . 


•3 


' 


1866 2,780 


11,249 


19,994 


Improvement 


4 


' 


1867 2,810 


19,127 


30,210 


" 


5 


, 


1868 2,951 


16,432 


28,246 


Prosperity . . 


4 


, 


1869 3»043 


15.167 


27.373 


" 


4 


, 


1870 3,121 


13.501 


25.137 


Decline 


•3 


,» 


1871 3,202 


13.271 


23.343 


" 


•3 




1872 3,263 


13.945 


25.394 


" 


•3 


,» 


1873 3.325 


13.216 


24,620 


>, 


.2 


, 


1874 3,403 


15.279 


27,300 


Depression . . 


•3 




1875 3437 


17.306 


29.645 


», 


•4 




1876 3.509 


20,844 


33,294 


" 


•5 


" 


1877 3.564 


24,138 


35.III 


», 


•5 


»» 


1878 3,620 


20,498 


31,735 


Improvement 


4 


' ■ 


1879 3.674 


16,689 


27,506 


" 


4 


' 


1880 3,745 


12,230 


22,749 


Prosperity . . 


2 


, 


1881 3,855 


11,311 


22,646 


»» 


2 


' 


1882 3,936 


13,539 


25.895 


Decline 


2 


' 


1883 4,010 


14,800 


28,377 


Depression . . 


3 


' 


1884 4,092 


17,923 


32,055 


" 


3 


' 


1885 4,170 


21,729 


37.135 


" 


4 ' 


* 


1886 4.477 


27,166 


43.185 


Improvement 


5 ' 


' 


1887 4,404 


41,156 


67,530 


»» 


7 ' 





RELIGIOUS AND SOCIAL CONDITIONS 361 



1888 
1889 
1890 
1891 
1892 
1893 
1894 
1895 
1896 

1897 
1898 
1899 
1900 
1901 
1902 
1903 
1904 

1905 
1906 
1907 
1908 



4.569 
4,689 
4,817 
4.985 
5.140 
5.236 
5.346 
5.486 
5.546 
5.614 
5.620 
5.604 
5.650 
5.753 
5.821 
5.900 
5.919 
5.931 
5.923 
5.989 
6,000* 

♦Estimated 



25.994 
29,286 
27.592 
30,614 
31.582 
34.444 
38,853 
35.327 
32.147 
31,090 

25.189 
24.514 
27,101 
28,398 
29.195 
29.403 
30,193 
34,881 
32.890 
34.642 
38,000* 



45.036 
49.859 
47.782 
52,086 
54.576 
57.561 
62,946 
57.932 
54.640 
52,211 
44,492 
44.185 
48,602 

49.879 
51.627 
51.521 
53.198 
57.722 
56,543 
59.346 
62,000* 



Prosperity . . 


4 Per 


f» 


4 " 


" 


4 " 


Decline 


•5 " 


11 


5 " 


Depression . . 


5 " 


" 


6 " 


" 


6 " 


Improvement 


5 


M 


4 " 


Prosperity . . 


3 " 


M 


3 " 


M 


3 " 


" 


3 " 


Decline 


4 " 


Depression . . 


5 " 


Improvement 


4 " 


Prosperity . . 


4 " 


M 


4 " 


Decline 


4 " 


Depression . . 


5 " 




CHAPTER VII. 

A TALK ON COPPERS 

[S seen in preceding chapters, the 
laws of trade and finance necessi- 
tate a fluctuation in the price 
of staple commodities. The 
tendency of the price of mxany 
commodities is upward. This is owing 
to several causes, among which may be 
mentioned the increased supply of gold, the 
increased price of labor and the increased 
consuming power of the people. There is a 
constant increase in demand which the increase 
in supply does not fully equal. When — however 
— this course of prices is represented graphically, 
it will be found that the lines will not be straight, 
but " zig-zag." Although each low point may 
not be as low as the preceding ones, and the 
general direction of prices may be upward; yet 
there is a continual fluctuation. A careful 
study will further show that these abrupt 
changes occur at intervals of every few years 
and are as certain to come as the sum.mer and 
the winter. 



A TALK OX COPPERS 363 

(Many reasons to prove this latter statement 
rnay be offered, but we will confine ourselves 
to one: if any one commodity continued always 
to increase in price without the fluctuation 
above mentioned, the tendency would be for 
every one to enter the business of manufactur- 
ing, selling or investing in that one commodity.) 

Of course there is a great difference in the 
fluctuations of different commodities and some 
commodities fluctuate more than others. It is, 
therefore, much more difficult to understand 
the laws affecting the fluctuation of the prices 
of some commodities than of others, especially 
enough to anticipate changes in their range. 
But it is possible to see the general trend of all 
prices taken as a group. As the general average 
price of all commodities fluctuates and the 
country passes from periods of prosperity to 
periods of depression and vice versa, so all the 
stocks on the New York Stock Exchange as a 
whole fluctuate. 

The stock market generally anticipates a per- 
iod of business prosperity or of business depres- 
sion and, as we have shown, it is Hkewise possible 
for investors to anticipate such periods, provided 
they obtain and study the necessary statistics. 
Like the farmer, they must be first willing to 
purchase the seed and cast it freely over the 



364 BUSINESS BAROIHETEKS 

ground, before expecting to reap a harvest. The 
majority of investors have not patience enough to 
spend money in obtaining data and waiting, 
seeing no immediate results. There are also 
a great many people who, knowing that the 
market must be lower in a year or so, have not 
sufficient self-control to wait a year before in- 
vesting a given amount of money. Money 
" burns in their pockets " and, as soon as they 
accumulate a certain amount, they seem deter- 
mined to invest it, even though they know that 
by placing it in a bank on deposit they can then 
purchase the same security for one-third of the 
price. The same class of people have not suffi- 
cient self-control and energy necessary to sell said 
securities in times of great prosperity. To 
those, however, who are willing to spend the 
money in accumulating the necessary data 
and who have the self-control to act in accord- 
ance with their better judgment, the opportun- 
ities to make money are unlimited. Such per- 
sons can, moreover, confine themselves to 
absolute and outright cash purchases and also 
invest in only the most conservative stocks. 

We cannot here study the application of the 
above theory to all classes of stocks. There- 
fore, as an illustration only one application 



A TALK OX COPPERS 365 

will be considered; namely, that of purchasing 
and selling high grade standard dividend pay- 
ing Copper Stocks in accordance with the mar- 
ket price of copper. Instead of endeavoring 
to explain the details of the system as used in 
purchasing Steel Stocks, Cotton Mill Stocks, 
and other Securities, the point of the example 
is to show how it is accomiplished with one 
single com.modity such as Copper. There are 
two main requirements: — First: that one must 
keep in constant touch with business conditions, 
and secondly: that one must always keep in- 
formed of the best mines, realizing that the 
low points and the high points change from one 
year to another. Therefore it is impossible for a 
broker to give a rule such as — that Copper Stocks 
should be sold when the price of m.etal is above 
24c and bought when the price of m-etal is below 
14 cents, as one year 24 cents may be high and 
another year it may not be high. Moreover, 
the safest stocks today miay not be those in 
which it was best to invest a few years ago. 
It therefore, is necessary to obtain data on 
these points from some central agency operated 
for the purpose. The press cannot be relied 
upon for this information, for reasons that can 
be readily understood. It is impossible for 
the press to always state the facts, especially 
when the outlook is unfavorable. 



Z66 BUSINESS BAROMETEKS 

The general method of procedure is as fol- 
lows : — One can best obtain an idea as to whether 
the present price is low or high by a study of 
such business barometers and fundamental 
statistics. Tables showing the high and low 
prices of the m.etal over a long period of years 
should of course also be studied; but these 
figures are not nearly so important as general 
figures on " Clearings," " Failures," " Foreign 
Trade," etc., by which the movem^ent in the 
price of metal may be forecasted. The price 
of the metal hears the same relation to Copper 
stocks as railroad ear?iings bear to railroad stocks. 
After the price of the metal publicly changes, it is 
too late to trade in the stock. In order to success- 
fully trade in the stock, one must forecast changes 
in the price of the metal. This can be done only 
by a study of Fundamental Statistics oyi getieral 
business conditions. 

The next difficulty comes in selecting a list 
of mines in which to invest. The following 
table gives a list of fifteen dividend paying 
copper mines and what we believe to be their 
maximum rate of dividend. This is based 
on copper at 24 cents a pound; the table 
shows also what the companies would 
theoretically earn with copper at 18 cents 
a pound and under. These figures are not 
exact as they are based on the assumiption 



A TALK OX COPPERS 367 

that^the cost per pound will be constant, what- 
ever the output, when in reality the smaller 
the output, the greater the cost per pound.* 
These figures therefore may be taken as maxi- 
mum figures throughout. 

Maximum 

Div. Rate i8c 17c i6c 15c 14c 

Cal. &Hec $80 $98.53 $88.42 $78.32 $68.21 $58.10 

Cal. &Ari 20 23.42 21.05 1967 17.70 15.92 

Wolverine 20 18.56 16.94 15-33 13 -71 12.10 

Granby ^, 12 14.23 12.77 11. 31 9.85 8.39 

Osceola 14 15.46 13.53 ii-6o 9.67 7.74 

Amalgamated ... 8 12.37 10.92 9.46 8.01 6.55 

Utah Con 6 8.03 7.41 6.79 6.17 5.56 

No. Butte 8 8.63 7.81 6.98 6.16 5.34 

Quincy 18 12.09 10.36 8.64 6.91 5.18 

Cop. Range 8 7.60 6.75 .5.91 5.07 4.23 

Mohawk 10 6.99 6.05 5.12 4.18 3.25 

Anaconda 7 6.33 5.54 4.75 3.95 3.17 

Butte Coal 2 2.00 1.75 1.50 1.25 i.oo 

Shannon 2 2 . 00 i . 59 1.20 .80 .40 

Tamarack 8 9.33 7 . 00 4 . 66 2.33 .00 

Such tables are compiled by taking the pres- 
ent output of the mine and its net cost per 
pound^ of the ore mined. The investor then 

*This is not absolutely true as the price of labor 
generally decreases as the output decreases. 

tConsider the present cost, for instance, to Amalgam- 
ated is 10 cents; to Anaconda 12 cents; to Calumet & 
Arizona 7 cents; to North Butte 9 cents. 



368 BUSINESS BAROMETERS 

deducts this cost per pound from the selHng 
price given in the table and ascertains the profit 
per pound. He then multipHes the profit per 
pound by the output and divides by the num- 
ber of shares outstanding. There is another 
factor, which enters; namely, that as the price 
declines, the production decreases. Therefore 
with a price of 14c probably only three-fifths 
as much copper is mJned as at a price of 
24c, and therefore the figures on the above 
table should be correspondingly cut down. 
From the Babson System's cards the 
output of each mine can be obtained 
without difficulty, and one can at any 
time ascertain the relation of the actual output 
to the maximum output and reduce the figures 
in the above table accordingly. In a broad 
way, the high cost producing mine suffers 
relatively the most by a decline in the metal 
market although, of course, in the matter of a 
loss in share earnings, the capitalization must 
also be taken into account. For instance, 
take two extremies Company No. 1 and Com- 
pany No. 2. The former has 300,000 shares 
and makes its Copper for 4.1 cents per pound. 



A TALK ON COPPERS 369 

The latter has only 60,000 shares and makes 
its Copper for 14 cents per pound. With 
the price of the metal at 15 cents instead of 26 
cents, the profits of the first company would be 
cut in half, or from $13.46 per share to $6.68; 
while the second's share profits would be only 
one-sixth what they would be at 26 cents and 
would drop from $34.00 to $5.33. A fluctuation 
of one cent in the price of copper means a 
difference of 62 cents per share in the profits of 
No. 1 and a difference of $2.33 per share to 
No. 2. In the same manner a one-cent drop 
in Copper shrinks the profits of Anaconda about 
83 cents per share, Copper Range about 85 
cents, North Butte and Amalgamated about 
$1.35. Of course after reaching this point it is 
possible to go a step further by ascertaining 
the per cent, earned on the seUing price, 
as well as the per-cent. earned on the par value 
which is ascertained by the above method. 

The above reasoning results in the following 
rules for practical investing : 

1. Make a list of the standard dividend 
paying stocks of companies which issue com- 
plete reports. 

2. Star on said list the names of such com- 
panies as are doing a sufficient amount of de- 



370 BUSINESS BAROMETERS 

velopment work and which have ore blocked 
out for a long period of years. 

3. Select the stock from among those which 
are starred that, with copper at a low price, will 
show the greatest percent earned on the selling 
price of the stock. The result of such analysis 
clearly shows which is the best single stock to 
purchase. If there are four or five which figure 
approximately the same, it is best for an in- 
vestor to divide his mioney am.ong these several. 

It should be remembered that when ascer- 
taining the cost of production, three factors 
must be considered: 

1. The pounds of copper per ton of rock 
crushed. 

2. The cost of supplies, labor, etc., includ- 
ing taxes and all fixed charges. 

3. The m.oney spent on development, 
machlner\^ etc. 

The first factor is the m.ost important for 
comparison purposes, and tables following give 
a list of the leading m.ines with the average tons 
of rock stamped daily, the pou?ids of copper per 
ton of rock, and the percentage of copper. 

The second factor is more or less constant 
with each mine; but the third factor is very 
different with different mines. This third 



A TALK ON COPPERS 371 

factor is important, but it is difficult to obtain 
satisfactory information excepting for the more 
conservative properties. 

After obtaining this data, the secret of suc- 
cessful investing depends simply upon pur- 
chasing these stocks when Business Barometers 
show general business to be in a period of de- 
pression, with copper at less than what it costs 
the average mine to produce it, and to keep 
these stocks for a few years, until such time as 
Business Barometers show the country to be in 
a period of great prosperity-but that a change 
in conditions is at hand — when the stocks should 
be sold. (At this time probably the majority 
of investors are just beginning to purchase.) 
When the stocks have been sold the money 
should be deposited in some safe bank or in- 
vested on high grade bonds, or until the price 
of the metal falls and the country experiences 
another period of depression. These same or 
other standard stocks are then again purchased, 
and in a few years later the investor again sells 
at a huge profit. There is little risk in such a 
method, if only the most conservative stocks 
are bought, and there is no reason why any man 
cannot turn an original investment of from about 
$5,000 into $200,000 within about twenty 



372 BUSINESS BAROMETERS 

years, provided he is willing to spend $100.00 
a year on collecting and tabulating fundamental 
statistics. 

The theory advanced in this chapter is based on 
the assumption that the mines will not become 
exhausted and that no unforeseen event will make 
the working of these mines unprofitable. We 
refer to the physical arrangement of the mines, 
to the discovery of much richer and greater 
mines in other countries and to the development 
of some other substance which will supersede 
copper in the industrial world. 

Neither of these assumptions need be considered 
when investing in conservative railroad stocks, as 
railroads will always be of value both for their 
tangible assets and for their earning capacity. 
Therefore, for an investment, we believe that 
" railroads " are much preferable to " coppers,'' 
although the latter are often profitable for spec- 
ulative purposes. 



A TALK ON COPPERS 



373 



TABLES 



Average Pounds of 



Copper per Ton 

Tons rock Lbs. cop- 



stpd. 
daily 



Calumet & Hecla 7,300 

Wolverine 1,200 

Champion 2,400 

Tamarack 1,560 

Baltic 2,300 

Osceola 2,700 

Michigan 540 

Trimountain 1,800 

Ahmeek 1,400 

Winona 320 

Quincy 4,100 

Isle Royale 500 

Mohawk i ,800 



Mass 

Centennial 
Allouez . . 
Victoria . 
Franklin . 



560 

700 

750 

300 

1450 

Adventure 340 



per in 
rock 



44 
30 
26 

25 
22 
18 
18 
17 
17 
17 
16 
16 
16 
14 
13 
13 
13 
12 
12 



% cop- 
per in 
rock 

2.24 



5 
3 

25 
12 

9 
9 
88 

857 
85 
8 



74 
,667 

.665 

.66 

.62 

.6 



374 



BUSINESS BARO^IETEKS 



Table of Profits for Ten Leading Copper 
Stocks 

This table shows how the profits are figured when copper 
is 13 cents per pound. The same method may be used 
when it is selling at any other price. 



Calumet & 


Shares 
outstanding 


estimate of Lbs of pro 

1907 output per duct 

in lbs. share per lb 


- per lb. per 

on 13c share 

copper on 13c 

copper 


Hecla ... 
Calumet & 


100,000 


90,000,000 


900 


9 


4 


36.00 


Arizona . . 


200,000 


37,000,000 


185 


7 


6 


II. 10 


Wolverine 


60,000 


9,500,000 


158 


6 


7 


11.08 


Granby . . 


135,000 


30,000,000 


222 


8.5 4-= 


10.00 


Osceola . . 


96,150 


20,000,000 


208 


II 


2 


415 


Amalgam - 














ated 


1,550,000 


230,000,000 


148 


10 


3 


4-45 


Utah Con- 














solidated 


300,000 


18,000,000 


60 


7 


6 


3.60 


North Butte 


400,000 


36,000,000 


90 


9 


4 


360 


Quincy . . . 


110,000 


20,000,000 


182 


II 


2 


364 


Copper 














Range . 


385.000 


40,000,000 


104 


9 


4 


4.15 


Mohawk . 


100,000 


12,500,000 


125 


9-5 


3.= 


) 4-37 



NOTE: — The above table may be carried further by 
dividing the " profits per share " by the " market price 
per share." 



A TALK ON COPPERS 375 

Table Showing Range in Price of Lake Copper 
Since 1860 

Highest Lowest 

Year Av Price Month Price Month 

i860 22 24.0 (Jan) to 19.7 (Dec) 

1861 22 27.0 (Dec) to 17.5 (July) 

1862 21 32.8 (Nov) to 20.7 (May) 

1863 33 38.7 (Dec) to 29.0 (July) 

1864 47 55.0 (July) to 39.0 (Jan) 

1865 39 50.5 (Jan) to 28.0 (July) 

1866 34 42.0 (Jan) to 26.5 (Nov) 

1867 25 29.2 (Jan) to 21.5 (Dec) 

1868 23 24.5 (Dec) to 21.5 (Jan) 

1869 24 27.0 (Feb) to 21.5 (Dec) 

1870 21 .23.3 (Nov) to 19.0 (March) 

1871 24 27.0 (Dec) to 21.2 (April) 

1872 35 44.0 (Apr) to 27.1 (Jan) 

1873 28 35.0 (Jan) to 21.0 (Nov) 

1874 22 25.0 (Jan) to 19.0 (Aug) 

1875 ^^ 23.8 (Sept) to 21.5 (Jan) 

1876 21 23.2 (Jan) to 18.7 (Aug) 

1877 19 20.5 (Feb) to 17.5 (Dec) 

1878 16 17.6 (Jan) to 15.5 (Oct) 

1879 18 21.7 (Nov) to 15.5 (Jan) 

1880 21 25.0 (Jan) to 17.8 (June) 

1881 18 20.3 (Dec) to 16.0 (July) 

1882 19 20.3 (Jan) to 17.8 (Apr) 

1883 16 18. 1 (Jan) to 14.8 (Nov) 

1884 13 15.0 (Dec) to ii.o (Dec) 

1885 10 1 1. 8 (Feb) to 9.8 (May) 

1886 II 12. 1 (Dec) to 10. (May) 



376 BUSINESS BAROMETERS 



Highest Lowest 

Year Av. Price Month Price Month 

1887 13 17.7 (Dec) to 9-9 (May) 

1888 16 17.6 (Nov) to 15.8 (Jan) 

1889 13 17.5 (Jan) to ii.o (Sept) 

1890 15 17.2 (July) to 14.0 (March) 

1891 12 15.0 (Jan) to 10.2 (Dec) 

1892 II 12.3 (Dec) to 10.5 (Feb) 

1893 ID 12.5 (Jan) to 9.6 (Aug) 

1894 9 10.2 (Jan) to 9.0 (June) 

1895 10 12.2 (Aug) to 9.3 (April) 

1896 10 12.0 Gune) to 9.7 (Jan) 

1897 II 12.0 (Jan) to 10.7 (Nov) 

1898 12 13.2 (Dec) to II.O Qan) 

1899 17 19.3 (Apr) to 13.2 (Jan) 

1900 16 17.2 (Apr) to 16.0 (Feb) 

1901 16 17.0 (Jan) to 13.0 (Dec) 

1902 12 13.5 (Feb) to II.O Qan) 

1903 13 15.3 (Mch) to 12.0 (Dec) 

1904 13 15.3 (Nov) to 12.2 (Feb) 

1905 15 18.8 (Dec) to 15.0 (May) 

1906 22 25.0 (Dec) to 17.8 (Sept) 

1907 20 26.2 (Mch) to 12.5 (Oct) 

1908 13 14.4 (Dec) to 12.7 (May) 



A TALK ON COPPERS 377 

Table Showing Range in Prices of Leading 
Copper Stocks Since 1889 

The prices of the leading copper stocks since 
1889 have ranged as follows: 

1890 AVERAGE 56-87 

Osceola ranged from 45 (Sept.) to 32 (Dec.) 
Quincy 130 (Sept.) to 80 (Nov.). 

1891 AVERAGE 55-76 

Osceola ranged from 40 (June) to 26 (Nov.) ; 
Quincy 85 (Feb.) to 112 (Aug.). 

1892 AVERAGE 82^91 

Osceola ranged from 24 (Jan.) to 38 (Nov.) ; 
Quincy 140 (Dec.) to 145 (Dec). 

1893 AVERAGE 65-89 

Osceola ranged from 36 (Jan.) to 25 (Aug.) ; 
Quincy 143 (Jan.) to 105 (Aug.). 

1894 AVERAGE 50-76 

Osceola ranged from 28 (Apr.) to 19 (July) ; 
Quincy 125 (Jan.) to 81 (July). 

1895 AVERAGE 41-74 

Osceola ranged from 42 (July) to 20 (Dec.) ; 
Quincy 102 (Mch.) to 170 (July); Wolverine 10 
(July) to 3 (Dec). 

1896 AVERAGE 43-58 

Osceola ranged from 21 (July) to 32 (Nov.); 
Quincy 134 (Feb.) to 104 (Aug.) ; Wolverine 6 
(Jan.) to 10 (Nov.). 



378 BUSINESS BAROMETERS 

1897 AVERAGE 47-63 

Osceola ranged from 28 (Apr.) to 427 (Sept.) ; 
Quincy 129 (Jan.) to 104 (Mch.) ; Wolverine 9 
(Apr.) to 19 (Sept.). 

1898 AVERAGE 53-91 

Osceola ranged from 38 (Mch.) to 87 (Dec.) ; 
Quincy 105 (Mch.) to 150 (Dec.) ; Wolverine 18 
(Mch.) to 38 (Dec). 

1899 AVERAGE 51-87 
Mohawk ranged from 3S (Apr.) to 14 (Dec.) ; 

Osceola 105 (Feb.) to 61 (Dec); Quincy 190 
(Jan.) to 125 (Dec) ; Utah Cons. 53 (Apr.) to 21 
(Dec); Wolverine 50 (Jan.) to 35 (Dec). 

1900 AVERAGE 57-78 
Amalgamated ranged from 83 (Jan.) to 100 

(Nov.); Mohawk 12 (June) to 28 (Dec); Os- 
ceola 58 (June) to 80 (Nov.) ; Quincy 132 (July) 
to 178 (Sept.); Utah Cons. 38 (Apr.) to 22 
(June); Wolverine 36 (June) to 49 (Dec). 

1901 AVERAGE 57-99 
Amalgamated ranged from 130 (June) to 01 

(Dec); Mohawk 22 (Jan.) to 56 (Sept.); Os- 
ceola 120 (Sept.) to 72 (Dec.) ; Quincy 180 (Apr.) 
to 125 (Dec) ; Utah Cons. 38 (Nov.) to 19 
(Dec.) ; Wolverine 74 (Sept.) to 44 (Dec ) 

1902 AVERAGE 47-74 
Amalgamated ranged from 79 (Feb.) to 53 

(Nov.) ; Copper Range 44 (Mch.) to 65 (Oct.) ; 



A TALK ON COPPERS 379 

Mohawk 27 (Jan.) to 49 (Sept.); Osceola 90 
(Feb.) to 48 (Nov.) ; Quincy 147 (Feb.) to 100 
(Nov.); Utah Cons. 27 (Feb.) to 19 (July); 
Wolverine 42 (Jan.) to 65 (Dec). 

1903 AVERAGE 42-71 
Amalgamated ranged from 76 (Mch.) to 34 

(Oct.) ; Copper Range 75 (Feb.) to 37 (July) ; 
Granby 53 (Apr.) to 36 (July); Mohawk 58 
(Feb.) to 31 (July); Osceola 79 (Feb.) to 44 
(July); Quincy 127 (Feb.) to 80 (Oct.); Utah 
Cons. 22 (Jan.) to 34 (May); Wolverine 75 
(Mch.) to 54 (July). 

1904 AVERAGE 46-81 
Amalgamated ranged from 43 (Feb.) to 83 

(Dec.) ; Copper Range 38 (Feb.) to 75 (Nov.) ; 
Granby 25 (Mch.) to 58 (Nov.); Mohawk 34 
(Feb.) to 58 (Nov.); Osceola 53 (Feb.) to 
98 (Nov.); Quincy 80 (Feb.) to 125 
(Nov.); Utah Cons. 30 (Jan.) to 47 (Nov.); 
Wolverme 68 (Jan.) to 110 (Nov.). 

1905 AVERAGE 64-98 
Amalgamated ranged from 70 (Jan.) to 112 

(Dec.) ; Copper Range 64 (Jan.) to 85 (Dec) ; 
Granby 50 (Jan.) to 105 (Dec); North Butte 
34 (Aug.) to 93 (Dec.) ; Mohawk 48 (May) to 65 
(Dec); Osceola 88 (Feb.) to 115 (Oct.); Quincy 
118 (Jan.) to 95 (May); Utah Cons. 39 (Mch.) 
to 59 (Nov.); Wolverine 105 (Jan.) to 135 
(Dec). 



380 BUSINESS BAROMETERS 

1906 AVERAGE 73-127 
Amalgamated ranged from 118 (Feb.) to 92 

(July) ; Copper Range 87 (Jan.) to 67 (July) ; 
Granby 80 (July) to 152 (Oct.); North Butte 
75 (Mch.) to 118 (Oct.); Calumet & Arizona 
107 to 185; Mohawk 55 (Mch.) to 85 (Dec); 
Osceola 93 (Mch.) to 151 (Dec); Quincy 114 
(Jan.) to 80 (July) ; Utah Cons. 70 (Jan.) to 52 
(June); Wolverine 131 (Jan.) to 190 (Dec). 

1907 AVERAGE 56-140 
Amalgamated ranged from 122 (Jan.) to 42 

(Oct.) ; Copper Range 105 (Jan.) to 44 (Oct.) ; 
Granby 152 (Feb.) to 60 (Oct.); North Butte 
120 (Jan.) to 30 (Oct.) ; Calumet & Arizona 198 
(Feb.) to 89 (Oct.); Mohawk 96 (Jan.) to 37 
(Oct.); Osceola 181 (Feb.) to 71 (Oct.); Quincy 
148 (Feb.) to 70 (Oct.) ; Utah Cons. 79 (Jan.) 
to 25 (Oct.); Wolverine 198 (Jan.) to 93 (Oct.), 

1908 AVERAGE 66-101 
Amalgamated ranged from 88 (Nov.) to 45 

(Feb.) ; Copper Range 84 (Nov.) to 55 (Feb.) ; 
Granby 110 (July) to 80 (Jan.); North Butte 
90 (Nov.) to 41 (Feb.) ; Calumet & Arizona 130 
(Aug.) to 93 (Feb.) ; Mohawk 73 (Nov.) to 45 
(Feb.) ; Osceola 135 (Dec) to 77 (Feb.) ; Quincy 
100 (Aug.) to 77 (Feb.) ; Utah Cons. 50 (Aug.) 
to 29 (Jan.); Wolverine 155 (Nov.) to 115 
(Jan.). 



Babson's Standard Barometers 

Special Service for Merchants and Investors relative to 
Underlying Financial Conditions 

(To avoid any misunderstanding we must first state that this work 
did not orignate with us; but was inaugurated some j'ears ago by some 
of the most prosperous banking and mercantile firms of America 
The expense incurred by each firm, when performing the work in- 
dependently, was so great, however, that the smaller banks, investors, 
and merchants hesitated to independently assume the responsibility. 
Therefore we were asked to have our central office do the work, dividing 
the expense among the different individuals who became our sub- 
scribers and shared the resulting benefits. As for many years we have 
been doing other work in the same way, we were willing to assume t he 
responsibility.) 

General Tables and Charts. 

Our work consists in collecting with great care, 
system and impartiality all facts and figures 
which can in any way aid in forecasting future 
business conditions. All figures are arranged, 
analyzed and tabulated, the more important 
figures relative to each subject being selected 
and forwarded to the subscribers. In addition 
to the Tables, the more important subjects are 
graphically shown in chart form. In all there 
are about twenty-five of these subjects or 
" Tables " such as Failures, Railroad Earnings, 
Crops, Bank Clearings, Gold Movements, Bal- 
ance of Trade, etc.. In short our work is the 
same as that of the regular clerks who might be 
in the employ of our subscribers and whose duty 
it might be to gather these statistics. Mer- 
chants who have these Tables at their offices 



382 BUSINESS BARO>IETERS 

can at any time refer thereto, and note whether 
or not the figures indicate a change in business 
conditions; and if so, to what extent. 
Weekly Barometer Letters 

For the special benefit of Merchants and In- 
vestors who have not the time to personally 
study our tables, we supplem^ent these figures 
by Weekly Letters which contain the results of 
our own studies reduced to barometer figures. 
By comparing the barom.eter figures for Present 
Conditions with the baromieter figures for Nor- 
mal Conditions, one mi ay readily forecast 
the nature of the next change in the mercantile, 
monetary and investment markets. 

Our conclusions regarding Present Conditions 
should be absolutely complete and correct, as 
this work requires only honesty and m^athe- 
matical correctness, and in fact may be verified 
by any honest, intelligent and careful book- 
keeper. As to our figures on the Normal 
Conditions, we sim.ply guarantee them to be 
impartial and in accordance with our best 
judgment; knowing that many experienced 
bankers and mierchants have acquired, through 
m.any years of similar work, a judgment which 
miay be far superior to ours. As, however, w^e 
supply all figures from which we deduct our 
conclusions on even Normal Conditions, our 



IMPORTANT ADDENDA 383 

subscribers take no risks and can at any time 
verify said conclusions. 

The figure for Present Conditions is deter- 
mined by studying the very latest bank clear- 
ings, railroad earnings, foreign trade, labor 
conditions, etc., and always shows the exact 
present conditions of the entire business world. 
By comiparing the figures for a series of weeks, 
subscribers immediately notice the tendency 
of mercantile, monetary and stock market 
conditions. 

The figure for Normal Conditions is deter- 
mined by studying the change and trend in 
conditions during the past, and what may be 
expected with the present wealth and popula- 
tion of the country. If the figure for Present 
Conditions is considerably greater than that 
for Normal Conditions, this signifies that there 
may be a change for the worse, and the difference 
in the figures gives a suggestion when this change 
for the worse may be expected. If the figure 
for the Present Conditions is less than that for 
the Normal Conditions, this indicates that a 
change for the better may be expected at any 
time, and the amount of difference shows about 
how soon the change may be expected. 

Investors and merchants receiving these 
Weekly Letters are therefore kept in close touch 



384 . BUSINESS BAROMETERS 

with the actual conditions in the United States 
and are able at any time to forecast: 

1. Mercantile Conditions of the United 
States as relating to manufacturing and com- 
merce, enabling manufacturers and merchants 
to use the flexible credit system. 

2. Monetary Conditions of the United States 
as relating to the conditions of the money mar- 
ket, rates of interest and the supply of funds. 

3. Investment Conditions of the United 
States; that is, the general course of the stock 
and bond markets, disregarding minor move- 
ments and manipulative influence. 

Monthly Reports and Revised Tables 

In addition to the Tables and Chart mentioned 
above, subscribers are forwarded each month a 
complete Monthly Report giving the new 
figures for the month on each subject and com- 
paring them with figures for the preceding 
month and figures for the same mionth the pre- 
ceding year. Moreover, with this report we 
send each month a complete set of new Tables, 
revised up-to-date, giving the figures on each 
subject by months for several years back, in- 
cluding the latest month. This avoids the nec- 
essity of posting the monthly figures in a loose- 
leaf ledger — although we are prepared to supply 



IMPORTANT ADDENDA 385 

such a hook to any subscriber desiring to keep 
more detailed figures than we give in these printed 
tables. 

Our Tables give the monthly figures for the 
past months of the current year and in many 
cases corresponding figures for a few years 
back. These monthly figures not only show 
subscribers whether the figures on a given 
subject are increasing or decreasing, but also 
enables them to make an estimate for the com- 
plete current year. This estimate may then be 
compared with complete annual figures for 
preceding years, which are also furnished by us. 
In many cases these annual figures are given for 
thirty or forty years, so that by intelligently 
comparing this estimate for the current year, 
with the figures for preceding years, one mi ay 
readily discover what the figures on any one 
subject indicate. 

If a banker or merchant at any time needs 
figures on any one of these subjects, such as for 
instance " Bank Clearings," he has only to 
turn to his tables, and note the table marked 
" Bank Clearings." There he will find the 
latest figures procurable for this year, monthly 
figures for the past few years and also the annual 
figures for thirty or m.ore previous years. 



386 BUSINESS BARO>IETERS 

Although the figures on any one of the twenty- 
five subjects may clearly indicate a change for 
the better or the worse, yet a subscriber does 
not w^holly rely on one subject. He studies the 
figures on all of the subjects, and compares the 
results in order to obtain a complete diagnosis 
of present conditions and make an intelligent 
forecast of future conditions. 

Conclusion and Total Cost 

The cost of this entire service is from $7.50 to 
$15.00 per month, with the first year payable in 
advance. This price entitles the subscriber 
to the following: — 

1. The General Tables containing original 
iigures on each of the twenty-five subjects; both 
by years and months and which tables are 
always up-to-date. 

2. The Weekly Letters containing the two 
Summary BaromiCter Figures on the Surface 
Conditions and Normal Conditions respectively. 

3. Monthly Reports giving the new figures 
each month on the twenty-five subjects together 
with figures for the previous month and the 
corresponding month of the previous year to- 
gether with a revision of the General Tables 
above mentioned. 

4. Special plate glass desk cover for Tables 
and board clip for Weekly Letters. 



IMPORTANT ADDENDA 387 

5. In addition to the above, we send from 
time to time special Charts, Letters and Reports 
as occasions demand. 

Subscribers are given a choice of the following 
two options at an additional cost of $10.00. 
Option 1 for Manufacturers and Merchants 

As this service is of immediate value to sub- 
scribers in connection with the purchase of 
goods and as the foundation of any system to 
reduce " costs " is a perm.anent record of what 
these costs have been in the past, we are supply- 
ing the following: 

(a) Special Loose-leaf Covers capable of 
any expansion and adaptable to the largest 
business. 

(b) Special ruled Sheets for recording the 
amount, merchandise prices and nam^es of sellers 
of all important items purchased. 

(c) Special Sheets for recording the Weekly 
Barometer Figures. 

Option 2 for Banks and Investors. 

A ledger in which the Weekly Summary Bar- 
ometer Figures may be posted each week and 
in which the subscriber may also keep a record 
of his investments. This is the most approved 
form of ledger obtainable for the purpose and 
contains : — 

(a) Portfolios for holding circulars and des- 
criptions of securities. 



388 BUSINESS BAROMETERS 

(b) Special Outlined Forms^ for recording 
complete descriptions of all bonds and stocks 
purchased and Ruled Pages for keeping the 
cost prices of said securities and a record of all 
interest and dividends received therefrom. 

(c) Special Sheets for recording the' Weekly 
Barometer Figures. 

SUBJECTS SERVING AS STANDARD 
BUSINESS BAROMETERS 

on which statistics are now being accumu- 
lated, analyzed, and distributed by Roger 
W. Babson, Wellesley Hills, Mass. 

1. Building operations (with Fire Losses) 
and real estate operations as affecting the 
" Total Wealth." 

2. Money in circulation. 

3. Comptroller's Reports (this is the only 
one of the 25 subjects for which no figures can be 
obtained monthly so we render them four or 
five times a year.) 

4. Loans of the New York City Banks. 

5. Cash held by the New York City Banks. 

6. Deposits of the New York City Banks. > 

7. Surplus Reserves of the New York City 
Banks. 



I3fPORTANT ADDENDA S89 

8. Total Bank Clearings of the United 
States. 

9. Bank Clearings of the United States 
excepting New York City. 

10. Stock Exchange Transactions. Tables 
on the number of shares traded in, the bond 
sales and the high and low prices of the ten 
leading stocks used by our office as a Barometer. 
The latter tables contain the high and low prices 
for each year since 1859 and the high and low for 
the current year, brought up-to-date each 
month. 

11. New Securities. Tables for the new 
securities hsted on the New York Stock Ex- 
change and notes on other issues pubHcly offered 
or authorized but as yet unlisted. 

12. Business Failures. Tables both on num- 
ber of failures and am.ount of liabilities. 

13. Labor Conditions. Tables of immi- 
gration figures and notes on the general situation. 

14. Imports of Merchandise into the United 
States. 

15. Exports of Merchandise from the United 
States. 

16. Balance of Trade. 

17. Gold Movements with tables on the 
Gold Exports, the Gold Imports and the Bal- 
ance. 

18. Domestic and Foreign Money Rates 



390 . BUSINESS BAROMETERS 

and Foreign Exchange, with tables on the 
rates in London, Paris and Berlin. 

19. Political Factors. 

20. Production of Gold. Tables giving the 
production in the Rand Mines which best show 
the trend in the production of the entire world. 

21. Commodity Prices and the Prices of Pig 
Iron, Copper, Cotton, and the Cereals. 

22. Crop Conditions and the Production of 
Pig Iron with complete comparative tables. 

23. The Gross and Net Earnings of ten 
leading railroads with annual figures on the 
capitalization, etc., of all railroads. 

24. Idle Car Figures for the current year 
and the corresponding months of the preceding 
two or three years. Annual figures are no value 
on this subject. 

25. Religious and Social Conditions and 
Miscellaneous Statistics. 



Applications to become subscribers should 
be mailed to 

Compiling Offices of Roger W. Babson, Inc. 
Wellesley Hills Sta., Boston, Mass. 
New York Offices, 33 Broadway. 



Final Word to Readers 

Upon reading the final proofs of this book, it 
occurs to the author that the book may possibly 
be the means of causing some persons to invest 
in stocks who will not give the proper study to 
statistics and general conditions. We therefore 
advise all readers that, if unwilling to invest 
one hundred dollars a year in collecting and tab- 
ulating necessary statistical data, it is better to 
buy no stocks whatsoever, but confine all invest- 
ments strictly to high grade bonds such as are 
recommended by conservative bond dealers. 

One other thing, — whether he buys stocks or 
bonds, the investor should not be in a hurry to 
make money too fast. The principal invested 
should grow slowly and naturally. Be willing 
to creep before walking and be willing to walk 
before running. Remember that there are many 
years in which to accomplish the desired ob- 
ject and that success depends very largely upon 
progressing slowly and carefully, especially dur- 
ing the first fev years. 



'* No, sir, ye can bet it ain't th' people that have 
no money that causes panics. Panics are th' 
result iv too manny people havin' money. Th' 
top iv good times is hard times an' th' bottom iv 
hard times is good times. Whin I see wan man 
with a shovel on his shouldher dodgin' eight thous- 
and autymobills I begin to think 'tis time to put me 
money in me boot." 

*' Don't git excited about it, Hinnessy, me boy. 
Cher up. 'Twill be all right tomorrow, or th' next 
day, or sometime. 'Tis wan good thing about 
this here wurruld, that nawthan' lasts long enough 
to hurt. I have been through manny a panic. I 
cud handle wan as well as Morgan. Panics cause 
thimsilves an' take care of thimsilves." 

Dooley. 



Important Notice 

WE OPERATE SPECIAL 

Instruction Courses 

ON 

Investments and Collateral 

FOR INVESTORS 

AND 

EMPLOYEES OF BOND HOUSES AND 
STOCK EXCHANGE FIRMS 



A booklet describing this work in detail will be mailed 
gratis upon request 



Address EDUCATIONAL DEPARTMENT of the 

OFFICE OF ROGER W. BABSON, Inc. 

WELLESLEY HILLS, MASS. 



A D VBRTISEMS. NTS 



COMPARATIVE STATISTICS 

Relative to the Listed 

RAILROAD, INDUSTRIAL AND 
COPPER STOCKS 



are collected, analyzed, indexed and forwarded by us to 
subscribers in all parts of the world. 

We supply this information printed on standard-sixed 
(5 in. X 8 in.) cards, thus allowing for the daily revision 
of any individual security without interfering with the 
alphabetical arrangement. We are now collecting this 
data as to Dividends, Earnings, News, etc. for the largest 
Banking Institutions in the world and will gladly send 
sample cards and complete details to any one not now a 
subscriber. Original cost of this service is 1 15.00 includ- 
ing cabinet and original installation, and the work is 
revised and supplemented daily at a cost of only $5.00 
per month. By doing this work for a large number of 
houses we are able to furnish a firm more for this price 
than a firm can accumulate and sort independently at a 
cost of several hundred dollars per month. 

For $5.00 per month additional we are able to 
supply similar information and keep the same 
up-to-date regarding Bond issues. 

THE BABSON SYSTEM 
Home Offices and Compiling Depts. 
Wellesley Hills Sta., Boston, Mass. 

New York Office: 33 Broadway 



AD VERTISEMENTS 



BUSINESS BAROMETERS 

OR 

FUNDAMENTAL STATISTICS 

relative to the underlying 

MONETARY AND MERCANTILE 
CONDITIONS 

We are collecting, analyzing and distributing statistics 
on the 25 subjects mentioned in this book and are prepared 
to supply the results to any Stock Exchange Firm, Bond 
House, Mercantile House, Manufacturer or Investor. 

We make no prophecies ourselves, but by a study of 
the data which we supply, one can readily ascertain 
whether we are in a Period of Prosperity, a Period of De- 
pression or are passing from one to the other. 

The cost of this service is very small in comparison 
with what it is costing firms to collect this data indepen- 
dently and we believe that our figures are more accurate 
and more up-to-date. Further particulars relative to 
this work will be sent gratis on application. Address 

Office of Roger W. Babson, Inc. 

Home Offices and Compiling Depts. 

Wellesley Hills Sta., Boston, Mass. 

New York Office: 33 Broadway. 



AD VERTISEME NTS 



How Money is Made 



..IN... 



Security Investments 



By Henry Hall 
of the New York Tribune 



Said by competent authorities to be 
one of the best ever issued on Security 
Investments. 

Shows how the captains of finance 
have grown so rich, and how through the 
study of Business Barometers any man 
with a regular occupation to depend upon 
for a livelihood may invest surplus>arn- 
ings, with a prospect of at least a mod- 
erate fortune at middle age. 

Price, in cloth, $1 ,50 Carriage, 15 cts. additional 
FOR SALE BY 

Educational Department of the 

OFFICE OF ROGER W. BABSON, Inc. 

Wellesley Hills, Mass. 



J^f^ 25 J 909 



LIBRARY OF CONGRESS 



027 292 964 6 



